S. 2323

One Hundred Sixth Congress

of the

United States of America

AT THE SECOND SESSION

Begun and held at the City of Washington on Monday,

the twenty-fourth day of January, two thousand

An Act

To amend the Fair Labor Standards Act of 1938 to clarify the treatment of stock

options under the Act.

Be it enacted by the Senate and House of Representatives of

the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ‘‘Worker Economic Opportunity

Act’’.

SEC. 2. AMENDMENTS TO THE FAIR LABOR STANDARDS ACT OF 1938.

(a) EXCLUSION FROM REGULAR RATE.—Section 7(e) of the Fair

Labor Standards Act of 1938 (29 U.S.C. 207(e)) is amended—

(1) in paragraph (6), by striking ‘‘or’’ at the end;

(2) in paragraph (7), by striking the period and inserting

‘‘; or’’; and

(3) by adding at the end the following:

‘‘(8) any value or income derived from employer-provided

grants or rights provided pursuant to a stock option, stock

appreciation right, or bona fide employee stock purchase program which is not otherwise excludable under any of paragraphs (1) through (7) if—

‘‘(A) grants are made pursuant to a program, the terms

and conditions of which are communicated to participating

employees either at the beginning of the employee’s participation in the program or at the time of the grant;

‘‘(B) in the case of stock options and stock appreciation

rights, the grant or right cannot be exercisable for a period

of at least 6 months after the time of grant (except that

grants or rights may become exercisable because of an

employee’s death, disability, retirement, or a change in

corporate ownership, or other circumstances permitted by

regulation), and the exercise price is at least 85 percent

of the fair market value of the stock at the time of grant;

‘‘(C) exercise of any grant or right is voluntary; and

‘‘(D) any determinations regarding the award of, and

the amount of, employer-provided grants or rights that

are based on performance are—

‘‘(i) made based upon meeting previously established performance criteria (which may include hours

of work, efficiency, or productivity) of any business

unit consisting of at least 10 employees or of a facility,

except that, any determinations may be based on

length of service or minimum schedule of hours or

days of work; or
S. 2323—2

‘‘(ii) made based upon the past performance (which

may include any criteria) of one or more employees

in a given period so long as the determination is in

the sole discretion of the employer and not pursuant

to any prior contract.’’.

(b) EXTRA COMPENSATION.—Section 7(h) of the Fair Labor

Standards Act of 1938 (29 U.S.C. 207(h)) is amended—

(1) by striking ‘‘Extra’’ and inserting the following:

‘‘(2) Extra’’; and

(2) by inserting after the subsection designation the following:

‘‘(1) Except as provided in paragraph (2), sums excluded from

the regular rate pursuant to subsection (e) shall not be creditable

toward wages required under section 6 or overtime compensation

required under this section.’’.

(c) EFFECTIVE DATE.—The amendments made by this section

shall take effect on the date that is 90 days after the date of

enactment of this Act.

(d) LIABILITY OF EMPLOYERS.—No employer shall be liable

under the Fair Labor Standards Act of 1938 for any failure to

include in an employee’s regular rate (as defined for purposes

of such Act) any income or value derived from employer-provided

grants or rights obtained pursuant to any stock option, stock appreciation right, or employee stock purchase program if—

(1) the grants or rights were obtained before the effective

date described in subsection (c);

(2) the grants or rights were obtained within the 12-month

period beginning on the effective date described in subsection

(c), so long as such program was in existence on the date

of enactment of this Act and will require shareholder approval

to modify such program to comply with section 7(e)(8) of the

Fair Labor Standards Act of 1938 (as added by the amendments

made by subsection (a)); or

(3) such program is provided under a collective bargaining

agreement that is in effect on the effective date described

in subsection (c).

(e) REGULATIONS.—The Secretary of Labor may promulgate

such regulations as may be necessary to carry out the amendments

made by this Act.

Speaker of the House of Representatives.

Vice President of the United States and

President of the Senate.