What are the guidelines regarding eligibility for premium pay?

The U.S. Department of the Treasury’s (“Treasury”) Final Rule states that municipalities may use Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) to provide premium pay for eligible workers performing essential work.[1] The Final Rule defines “essential work” as work involving regular in-person interactions or regular physical handling of items that were also handled by others. A worker performing telework from a residence, for example, would not be engaged in essential work and may not receive premium pay.[2]

The Final Rule provides a definition of premium pay as follows:

Premium pay means an amount of up to $13 per hour that is paid to an eligible worker, in addition to wages or remuneration the eligible worker otherwise receives, for all work performed by the eligible worker during the COVID-19 public health emergency. Such amount may not exceed $25,000 in total over the period of performance with respect to any single eligible worker. Premium pay may be awarded to non-hourly and part-time eligible workers performing essential work. Premium pay will be considered to be in addition to wages or remuneration the eligible worker otherwise receives if, as measured on an hourly rate, the premium pay is:

1. With regard to work that the eligible worker previously performed, pay and remuneration equal to the sum of all wages and remuneration previously received plus up to $13 per hour with no reduction, substitution, offset, or other diminishment of the eligible worker’s previous, current, or prospective wages or remuneration; or
2. With regard to work that the eligible worker continues to perform, pay of up to $13 per hour that is in addition to the eligible worker’s regular rate of wages or remuneration, with no reduction, substitution, offset, or other diminishment of the worker’s current and prospective wages or remuneration.[3]

The Final Rule also provides the following guidelines recipients can use to assess eligibility for premium pay. First, Treasury clarified that all public employees of recipient governments are already included in the definition of “eligible worker.”[4] Treasury also clarified that the chief executive’s discretion to designate additional sectors as critical relates only to “non-public” sectors, since all public employees are already included in the definition.[5] In order to receive premium pay, these workers must meet additional premium pay requirements (e.g., performing essential work).[6] Further to this point, Treasury clarifies that premium pay can only be paid to employees who have in-person interactions with the public or the workforce, or are involved in regular physical handling of items that were handled by, or are to be handled by the public or the workforce.[7] Employees who exclusively telework are not eligible.[8] Regarding income standards, Treasury leaves in place the previous standard that premium pay cannot be paid to workers earning more than 150% of the state or area median income, whichever is greater. The Final Rule also adds that a written justification is not required if a “worker is not exempt from the Fair Labor Standards Act overtime provisions (29 U.S.C. § 207).”[9]

If an employee does not meet these criteria, recipients may submit a written justification for premium pay. Treasury specifically noted eligibility for front line healthcare workers as likely able to be justified, regardless of income or FLSA status.[10] The Final Rule provides more information related to allowability of premium pay for elected officials and specifically references the requirement that recipients have a conflict-of-interest policy consistent with 2 C.F.R. § 200.318(c).[11] Treasury asserts that this policy prohibits elected officials from steering funds to projects in which they have a financial interest or using funds to pay themselves premium pay.[12]

Last Updated: March 11, 2022