New Care Act Could Reduce Overtime Pay for Workers Receiving Dependent Care Benefits

The “Empowering Employer Child and Elder Care Solutions Act” sounds like a win for working families, but Section 2 contains a major change to federal wage law that could quietly reduce how much money lands in your bank account when you work extra hours. This section amends the Fair Labor Standards Act (FLSA), the law that sets rules for minimum wage and overtime, to exclude the value of employer-provided dependent care assistance from the calculation of your regular rate of pay.

The Overtime Calculation Catch-22

Here’s the deal: When you work overtime (more than 40 hours in a week), your employer must pay you time-and-a-half based on your “regular rate of pay.” Right now, almost everything your employer pays you—including bonuses, stipends, and the cash value of some benefits—is usually factored into that regular rate. This new provision says that if your employer pays for or reimburses you for child or elder care, that money or service value cannot be included in your regular rate (SEC. 2).

What does this mean in real life? Say your base wage is $20/hour, and your employer also reimburses you $200 per week for daycare. Under current law, that $200 would have to be factored in, bumping your regular rate up slightly—maybe to $25/hour—and increasing your time-and-a-half overtime rate to $37.50/hour. Under this new rule, that $200 is completely ignored. Your regular rate stays $20/hour, and your overtime pay remains $30/hour. For employees who rely on overtime to make ends meet, this change effectively makes their overtime hours less valuable, reducing their overall take-home pay simply because they utilize a care benefit.

Encouraging Benefits, But at What Cost?

The clear goal here is to encourage more employers to offer dependent care benefits. By excluding these payments from the overtime calculation, the bill removes a potential financial disincentive for companies; they won’t have to worry about the benefit driving up their overtime liability. However, the mechanism used to achieve this goal places the cost reduction squarely on the backs of employees who work overtime. It’s a classic trade-off: employees might gain access to a much-needed benefit, but they lose guaranteed income protection under the FLSA when they clock extra hours.

This change applies immediately to all workweeks starting the day the Act becomes law. If you’re a parent or caregiver who receives employer assistance and frequently works overtime—whether you’re a nurse picking up extra shifts or a construction manager pushing a deadline—you need to check your next pay stub closely. While the benefit itself is helpful, the math on your overtime earnings will change, and not in your favor.