On January 5, 2018, the Department of Labor’s (DOL) Wage and Hour Division issued 17 Opinion Letters addressing issues under the Fair Labor Standards Act (FLSA) that had been originally drafted in 2009. Specifically, in the last days of the Bush Administration, the DOL prepared these Opinion Letters, which were pulled back less than two months later after President Obama took office. Interestingly, these are the first Opinion Letters that have been issued since 2009. These letters largely examine application of the White-Collar Exemptions under Section 13(a) of the Act, but they also explore treatment of on-call time, bonuses, commission compensation, and joint-employment vs. volunteer status. Although none of these letters represent ground-breaking interpretations of the law and the DOL characterizes the guidance as very fact specific, issuing them provides some additional guidance on which employers may be able to rely, who are faced with similar factual situations, and indicates how the Trump Administration will interpret these topics going forward.
In relation to on-call time, two letters – FLSA2018-1 and FLSA2018-7 – address when on-call time is compensable, as well as deductions from exempt employee pay for failure to be available for an on-call shift. FLSA2018-1 starts from the premise that on-call time need not be compensated if the employee can use the time for their own purposes “unless the restrictions [on their time] are so burdensome and the call-backs so frequent as to prevent free use of their time.” In this context, the letter explains that requiring ambulance personnel in a small town to respond in five minutes to call-backs made on a relatively infrequent basis (about three per week) did not present the type of restrictions that would make the on-call time compensable.
In FLSA2018-7, the DOL explains when an employer can deduct time from an exempt employee’s pay, who is not available to be called in for her on-call hours. According to the DOL’s interpretation, if the employee’s unavailability for on-call time would constitute a full day of work, the hours actually missed can be deducted from the employee’s pay. Accordingly, this guidance indicates that the DOL under President Trump may take a narrower view of compensable on-call time and a broader view of when its permissible to deduct time from exempt employee pay, although the DOL did emphasize that the time away must be equivalent to a full day of work to be deducted.
Another common FLSA issue addressed by these reissued letters is the treatment of employee bonuses. Specifically, in FLSA2018-9, the DOL revised a prior Wage and Hour interpretation and explained that providing a non-discretionary bonus paid at the end of the year, calculated as a percentage of straight-time and overtime earnings, is compliant. As to the change to a prior interpretation, FLSA2018-9 explains that, to the extent Opinion Letter WH-241 requires all remuneration to be used in calculating a percentage bonus, even payments outside what’s required to be included in the regular rate of pay, this portion of the prior Opinion Letter is withdrawn. Moreover, the DOL makes clear its understanding that a non-discretionary bonus calculated from a percentage of straight-time pay and overtime compensation does not require additional overtime compensation be provided because payment of the bonus would increase the straight-time and overtime compensation by the same percentage.
Under the FLSA employers are required to pay overtime based on the regular rate of pay, which includes non-discretionary bonuses, and this letter indicates that this requirement is met by calculating the bonus using a percentage of straight-time and overtime compensation. Indeed, FLSA2018-11 reiterates this concept in verifying that a bonus paid to non-exempt employees for all days worked, and not conditioned on any other factor, must be included in determining each employees’ regular rate of pay.
Furthermore, several of the letters address which types of employees fall into one of the exemptions identified in Section 13(a)(1) based on the specific types of duties performed. These letters generally start from the assumption that the employee is earning at least $455.00 per week – the former salary threshold level for exempt employees prior to the DOL’s 2016 rulemaking to increase that salary threshold level. For example, in one letter, FLSA2018-4, the DOL addresses whether a project superintendent at a construction site can be classified as an exempt employee under the FLSA. Assessments of this type of position have been split on whether an employee can be treated as exempt because the evaluation is so dependent on the specific type of duties assigned. FLSA2018-4 opines that a project superintendent could fall within the administrative exemption where, as is the position is described in the letter, he or she primarily is responsible for overseeing the construction project from start to finish, exercises independent judgment in securing and hiring subcontractors and overseeing their work (among other, similar duties), and made significant decisions about how the project would be performed. In addition to addressing the specific situation described in the inquiry, the Letter also demonstrates how the DOL would analyze a question of exempt status under Section 13(a)(1), as this letter considers three potential exemptions under Section 13(a)(1) – professional, executive, and administrative.
Although these guidance documents do not establish new law or even necessarily apply to many employers, companies should be aware of them because they may be very helpful in trying to determine how to navigate the FLSA under similar facts as those addressed in each letter. Additionally, employers may be able to rely on these letters to show the DOL’s interpretation of a specific provision in defending itself against claims alleged by employees or enforcement actions initiated by the DOL. We may see more guidance of this type once a new head of the Wage and Hour Division is confirmed. On January 18, 2017, Cheryl Stanton was approved by the Senate Health, Education, Labor, and Pensions Committee, but her nomination must still face a full Senate vote before she can be confirmed.