Well, that was fast! In the first week of 2020, the Department of Labor issued three new opinion letters regarding wage and hour rules. According to the DOL, “an opinion letter is an official written opinion…of how a particular law applies in specific circumstances presented by an employer, employee, or other entity.”
The key words here are “particular” and “specific.” Opinion letters give employers general insight on how to handle similar situations and provide a good faith defense against potential FLSA liabilities. However, because of their specificity, not every opinion letter is relevant to every employer.
Nevertheless, if you care about labor compliance—and what employer doesn’t?—it’s important to stay on top of them. So, here’s the essential takeaways of the year’s first opinion letters.
Opinion Letter FLSA2020-1 – On Allocating Nondiscretionary Bonuses When Overtime Hours Are Worked
In the scenario addressed in Opinion Letter FLSA2020-1, the employer offered to pay employees a $3,000 nondiscretionary bonus upon completion of a 10-week training period. (They also need to sign up for a second eight-week training period, but do not need to start training to receive the bonus.)
During the 10-week period, one employee worked eight regular 40-hour workweeks, but worked overtime during two weeks: 47 hours in Week 5 and 48 hours in Week 9.
The question: how does the employer correctly allocate the $3,000 bonus over the 10-week period?
Breaking it down, the FLSA opinion letter declares:
- The employee should be paid one-and-one-half times his/her regular rate for hours worked in excess of 40 during a workweek.
- The employee’s regular rate is computed using “all remuneration” he/she received, unless specifically excluded by the FLSA.
- In this case, the nondiscretionary bonus is deemed remuneration that should be included to calculate an employee’s regular rate.
- The employer should allocate the bonus equally per workweek over the 10-week period. $3,000 split equally over 10 weeks equal $300 per week.
- The employer may assume an equal amount of the bonus was earned during each work hour in the pay period.
Therefore, the employee should identify which workweeks of the training period the employee worked more than 40 hours (Weeks 5 and 9) and compute the overtime pay due based the weekly allocation of the bonus—i.e., $300—for each of those workweeks.
Opinion Letter FLSA2020-1-A – How Combined Health Districts Should Count Employees to Determine FMLA Eligibility
Because Opinion Letter FLMA2020-1-A concerns government agencies, it’s of less relevance to corporate employers. In brief, the question posed by a health district in Ohio was: must it must count the employees of the county where it is located for the purpose of determining Family and Medical Leave Act (FMLA) eligibility for its employees?
As you know, employers are required to provide FMLA when they have 50 or more employees working within a 75-mile radius.
According to the opinion letter, the health district was not required to count county employees toward its FMLA headcount because the health district and the county are considered two separate entities under numerous criteria established by Ohio law—such as that the health district can enter under contracts independently and receives no funds from the county.
Opinion Letter FLSA2020-2 – Whether Per-Project Payments Satisfy the Salary Basis Test for Exemption
In the scenario addressed by FLSA2020-2, a company that provides services to schools questioned whether its educational consultants—who work on a project basis—are exempt from overtime under specific circumstances.
In the first circumstance, the employer assigned a consultant a curriculum development project. The consultant worked on it throughout the school year (40 weeks), maintaining irregular hours. The consultant was paid $80,000 in 20 biweekly installments.
Under the second circumstance, the employer assigned that same consultant a second project: conducting workshops over an eight-week period that overlapped the first project. The consultant was paid $2,000 for this second project.
The employer notes that sometimes a project’s scope—and its fees—are revised midstream at the school’s direction, changing the employee’s compensation.
Breaking it down, the FLSA opinion letter—which assumes that “consultants” meet the duty requirements of employees—declares:
- Under both scenarios, the employer’s payment method satisfied the salary basis requirement for overtime exemptions, because the payments don’t vary from week to week based on hours worked or quality of work.
- Furthermore, in the second scenario, the salary basis test was met because the employee received a guaranteed minimum amount in excess of the salary threshold.
- The fact that the total compensation might change during the year wasn’t relevant, as long as it satisfies the FLSA’s salary basis and extra compensation requirements.
- Should the employee’s pay decrease because the scope of the project changed, the exemption stands—as long as compensation stays above the minimum salary threshold and isn’t based on quality or quantity of work performed.
Maintaining Labor Compliance in an Ever-changing World
Wage and hour laws continue to change so quickly, it’s hard to keep up. When it comes to compliance, your HR software should be one of the strongest tools at your disposal. EPAY’s time and labor system features built-in compliance safeguards that help employers avoid violations, fines, lawsuits, and settlements. From managing overtime and meal breaks correctly…to maintaining detailed records…to providing you with access to our 24/7 HR compliance portal, we can help you improve compliance—learn how.