How do FLSA § 7(e)(8) stock options work for the regular rate?

29 U.S.C. § 207(e)(8) and 29 CFR 778.200(a)(8) exclude value or income from qualifying employer-provided stock options, SARs, or bona fide ESPPs from the regular rate. Ordinary after-40 half-time still applies to hours worked. The stock value may not be credited toward statutory overtime.

Classic $20 × five 10h + $140 stock-option income?

FLSA after-40 pay $1,100 + excluded $140 stock value = $1,240. Ordinary /overtime/ is $1,100. Including the same $140 in the regular rate totals $1,254. Classic 778.215 with $90 is $1,190. Classic 778.224 with $80 is $1,180. Classic 778.213 with $100 is $1,200. Classic 778.211 with $250 is $1,350. Classic 778.225 with $150 is $1,250. Classic 778.222 with $75 is $1,175. Classic 778.212 with $1,600 is $2,700.

What if the exercise price is under 85% of FMV?

For stock options and SARs, § 7(e)(8)(B) requires an exercise price of at least 85% of fair market value at grant. Below 85%, the exclusion fails and the value is included in the regular rate. Classic same punches → $1,254 (IN RR).

Do ESPPs need the 6-month / 85% gates?

The 6-month non-exercisability and ≥85% FMV exercise-price gates apply in the case of stock options and stock appreciation rights. A bona fide ESPP still needs communicated program terms and voluntary exercise (and performance gates when awards are performance-based).

How is § 7(e)(8) different from 778.215 benefit plans?

778.215 covers § 7(e)(4) irrevocable employer contributions to a trustee for health/retirement/life/accident plans (classic $90 → $1,190). § 7(e)(8) covers stock option / SAR / ESPP value (classic $140 → $1,240). Different statute clause, different classic dollars.

FLSA § 7(e)(8) Stock Options / SARs / ESPP — Excluded from Regular Rate

How § 7(e)(8) pays

Exclusion of the stock value, not of the hours. Section 778.200(a)(8) implements § 7(e)(8): value or income from qualifying employer-provided grants or rights under a stock option, SAR, or bona fide ESPP stays out of the regular rate and cannot be credited toward statutory overtime. Hours worked still earn ordinary extra half-time after 40 at the typed rate. Total = FLSA after-40 base + stock value.

§ 7(e)(8) gates. Program terms must be communicated; for options/SARs the grant cannot be exercisable for at least 6 months and the exercise price must be at least 85% of FMV at grant; exercise must be voluntary; and performance-based awards must meet unit/facility criteria (≥10 employees) or sole-discretion past-performance rules.

Gate failures put the dollar in RR. Exercise price under 85% FMV, early exercisability, non-voluntary exercise, or undisclosed program terms put the value into the regular rate (778.209 recomputation).

Not 778.215 / 778.211 / 778.213. Benefit-plan contributions under 778.215 are § 7(e)(4) (classic $90 → $1,190). Discretionary bonuses under 778.211 are § 7(e)(3)(a) (classic $250 → $1,350). Profit-sharing under 778.213 is § 7(e)(3)(b) (classic $100 → $1,200). Stock options are the § 7(e)(8) path.

Classic · $20 · five 10h · $140 stock option → $1,240 (vs /overtime/ $1,100 · include-in-RR $1,254 · 778.215 $90 $1,190 · 778.224 $80 $1,180 · 778.213 $100 $1,200 · 778.211 $250 $1,350 · 778.225 $150 $1,250 · 778.222 $75 $1,175 · 778.212 $1,600 $2,700).
Exercise price 80% FMV / early exercisable / not voluntary / not communicated / contrast · same punches · $140 → $1,254 (IN RR).
SAR / ESPP · $140 → $1,240.
Five 8h + $140 (no OT) → $940.
$0 stock value → $1,100 (ordinary after-40).

Sources

29 U.S.C. § 207(e)(8) — stock option / SAR / ESPP statutory text (Cornell LII, HTTP 200)
29 CFR § 778.200(a)(8) — Inclusion / exclusion / crediting framework (HTTP 200)
29 CFR § 778.200 — eCFR (HTTP 200)
WHD Fact Sheet #56A — Regular rate under the FLSA (HTTP 200)
/flsa-778-215-benefit-plans/ — 778.215 § 7(e)(4) cousin
/flsa-778-211-discretionary-bonus/ — 778.211 discretionary cousin
/flsa-778-213-profit-sharing/ — 778.213 Part 549/547 cousin
/flsa-regular-rate/ — 778.209 include-in-RR contrast
/overtime/ — ordinary after-40 baseline

FAQ

Classic five 10h + $140 stock option?

$1,100 FLSA after-40 + $140 excluded stock value → $1,240 vs /overtime/ $1,100 vs include-in-RR $1,254 vs 778.215 $90 $1,190 vs 778.224 $80 $1,180 vs 778.213 $100 $1,200 vs 778.211 $250 $1,350 vs 778.225 $150 $1,250 vs 778.222 $75 $1,175 vs 778.212 $1,600 $2,700.

Exercise price under 85% of FMV?

Include in RR for options/SARs. Classic → $1,254.

Same as /flsa-778-215-benefit-plans/?

No. 778.215 is § 7(e)(4) irrevocable benefit-plan contributions. § 7(e)(8) is stock option / SAR / ESPP value. Classic dollars differ ($1,190 vs $1,240).

Does ESPP need the 6-month hold?

The 6-month and ≥85% FMV gates apply to stock options and SARs. ESPPs still need communicated terms and voluntary exercise.

Can the stock value be credited toward OT?

No. Like other § 7(e) exclusions outside (5)–(7), stock-option value is not creditable toward statutory overtime.