106TH CONGRESS

2D SESSION S. 2323

AN ACT

To amend the Fair Labor Standards Act of 1938 to clarify

the treatment of stock options under the Act.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Worker Economic Op5 portunity Act’’.
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1 SEC. 2. AMENDMENTS TO THE FAIR LABOR STANDARDS

2 ACT OF 1938.

3 (a) EXCLUSION FROM REGULAR RATE.—Section

4 7(e) of the Fair Labor Standards Act of 1938 (29 U.S.C.

5 207(e)) is amended—

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

7 end;

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

9 inserting ‘‘; or’’; and

10 (3) by adding at the end the following:

11 ‘‘(8) any value or income derived from em12 ployer-provided grants or rights provided pursuant

13 to a stock option, stock appreciation right, or bona

14 fide employee stock purchase program which is not

15 otherwise excludable under any of paragraphs (1)

16 through (7) if—

17 ‘‘(A) grants are made pursuant to a pro18 gram, the terms and conditions of which are

19 communicated to participating employees either

20 at the beginning of the employee’s participation

21 in the program or at the time of the grant;

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

23 appreciation rights, the grant or right cannot

24 be exercisable for a period of at least 6 months

25 after the time of grant (except that grants or

26 rights may become exercisable because of an
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1 employee’s death, disability, retirement, or a

2 change in corporate ownership, or other cir3 cumstances permitted by regulation), and the

4 exercise price is at least 85 percent of the fair

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

6 ‘‘(C) exercise of any grant or right is vol7 untary; and

8 ‘‘(D) any determinations regarding the

9 award of, and the amount of, employer-provided

10 grants or rights that are based on performance

11 are—

12 ‘‘(i) made based upon meeting pre13 viously established performance criteria

14 (which may include hours of work, effi15 ciency, or productivity) of any business

16 unit consisting of at least 10 employees or

17 of a facility, except that, any determina18 tions may be based on length of service or

19 minimum schedule of hours or days of

20 work; or

21 ‘‘(ii) made based upon the past per22 formance (which may include any criteria)

23 of one or more employees in a given period

24 so long as the determination is in the sole
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1 discretion of the employer and not pursu2 ant to any prior contract.’’.

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

4 Fair Labor Standards Act of 1938 (29 U.S.C. 207(h)) is

5 amended—

6 (1) by striking ‘‘Extra’’ and inserting the fol7 lowing:

8 ‘‘(2) Extra’’; and

9 (2) by inserting after the subsection designation

10 the following:

11 ‘‘(1) Except as provided in paragraph (2), sums ex12 cluded from the regular rate pursuant to subsection (e)

13 shall not be creditable toward wages required under sec14 tion 6 or overtime compensation required under this sec15 tion.’’.

16 (c) EFFECTIVE DATE.—The amendments made by

17 this section shall take effect on the date that is 90 days

18 after the date of enactment of this Act.

19 (d) LIABILITY OF EMPLOYERS.—No employer shall

20 be liable under the Fair Labor Standards Act of 1938 for

21 any failure to include in an employee’s regular rate (as

22 defined for purposes of such Act) any income or value de23 rived from employer-provided grants or rights obtained

24 pursuant to any stock option, stock appreciation right, or

25 employee stock purchase program if—
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1 (1) the grants or rights were obtained before

2 the effective date described in subsection (c);

3 (2) the grants or rights were obtained within

4 the 12-month period beginning on the effective date

5 described in subsection (c), so long as such program

6 was in existence on the date of enactment of this

7 Act and will require shareholder approval to modify

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

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

10 amendments made by subsection (a)); or

11 (3) such program is provided under a collective

12 bargaining agreement that is in effect on the effec13 tive date described in subsection (c).

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

15 promulgate such regulations as may be necessary to carry

16 out the amendments made by this Act.

Passed the Senate April 12, 2000.

Attest:

Secretary.
106TH CONGRESS

2D SESSION S. 2323

AN ACT

To amend the Fair Labor Standards Act of 1938

to clarify the treatment of stock options underthe Act.