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Crediting of Facilities and Special Minimum Wage (SMW) Issues Under FLSA Section 14(c)

Wages may take the form of cash or facilities (such as meals, lodging and transportation). Section 3(m) of the FLSA permits an employer, under conditions specified in Regulations 29 CFR Part 531, to count toward its special minimum wage obligations, the “reasonable cost” of furnishing board, lodging or other facilities that are customarily furnished to employees. When wages take the form of board, lodging or other facilities, employers are subject to the additional record keeping requirements detailed in Regulations 29 CFR Part 516.27.

In order for the employer to take credit toward the SMW, the facilities being furnished must be primarily for the benefit of the employee and their costs would not otherwise be incurred by the employer. In addition, any contribution towards the costs of providing the facilities, either by the workers with disabilities or any third party, must be deducted when determining the employer’s reasonable cost of furnishing the facilities.

The following are examples of costs a facility might incur that could be directly related to providing room and board and could be credited toward wage obligations to the extent the costs are incurred to the benefit of the workers with disabilities and would not otherwise be incurred by the employer:

  • Cost to the facility of renting dormitories, kitchens, and recreational areas;
  • Cost of depreciation (including the depreciation of furniture and other equipment used by the worker with a disability) if the buildings comprising the facility are owned by the facility;
  • Laundry costs;
  • Food costs;
  • Cost of fire and similar insurance;
  • Utility costs;
  • Salaries paid to employees whose jobs are an integral part of providing the room and board (such as cooks, janitors, kitchen helpers, and maintenance personnel); and
  • Cost to the employer of providing home to work transportation to the client.

The following examples are not wage payments and may not be credited toward wage obligations:

  • The value of employees’ food stamps that are used to purchase food for the facility when the employer calculates the reasonable cost of board;
  • Donated clothing worn by workers with disabilities unless the employer incurs a cost in making the clothes wearable;
  • Stipends or living allowances paid to a worker with a disability by a third party rehabilitation organization or a government agency;
  • Reimbursement for transportation to and from home (dormitory or group home) and the job site (work center) provided by some other organization or governmental agency (Federal, State, or local); and
  • Employer provided transportation between job sites (not normal home-to-work travel).

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FLSA Section 14(c) Advisor | Wage and Hour Division