A few months ago, we covered the news that the federal Department of Labor announced a new final overtime rule, which went into effect January 1, 2020. But the DOL was not quite finished! The DOL stayed busy over the holiday break and has continued this trend in the new year. Below, we summarize these recent updates from the DOL, including updates to the “regular rate” regulations applicable to the Fair Labor Standards Act (“FLSA”); new opinion letters on the FLSA and the Family and Medical Leave Act (“FMLA”) and a new final rule addressing joint employer regulations to help you keep up with the DOL as you begin 2020.
DOL announces new “regular rate” rule
First, right before the Christmas holidays, the DOL announced a new rule revising the regulations that govern how employers compute overtime payments for salaried, non-exempt employees under the FLSA. The FLSA requires overtime pay of at least one and one half times the “regular rate” for time worked in excess of 40 hours per workweek. The previous regulation did not provide much certainty to employers regarding when benefits and perks had to be included when calculating the “regular rate.” The new rule clarifies which perks and benefits must be (and do not have to be) included in the regular rate of pay, and it comes at a great time, as the DOL reports that the revision is the first significant change to these regulations in nearly fifty years.
The rule goes into effect January 15, 2020. What do employers need to know? The new final rule clarifies that employers may offer the following perks and benefits to employees without risk of additional overtime liability:
- the cost of providing certain parking benefits, wellness programs, onsite specialist treatment, gym access and fitness classes, employee discounts on retail goods and services, certain tuition benefits (whether paid to an employee, an education provider, or a student-loan program), and adoption assistance;
- payments for unused paid leave, including paid sick leave or paid time off;
- payments of certain penalties required under state and local scheduling laws;
- reimbursed expenses including cellphone plans, credentialing exam fees, organization membership dues, and travel, even if not incurred “solely” for the employer’s benefit; and clarifies that reimbursements that do not exceed the maximum travel reimbursement under the Federal Travel Regulation System or the optional IRS substantiation amounts for travel expenses are per se “reasonable payments”;
- certain sign-on bonuses and certain longevity bonuses;
- the cost of office coffee and snacks to employees as gifts;
- discretionary bonuses, by clarifying that the label given a bonus does not determine whether it is discretionary and providing additional examples; and
- contributions to benefit plans for accident, unemployment, legal services, or other events that could cause future financial hardship or expense.
You can find the full text of the new rule here.
DOL issues three new opinion letters
Next, on January 7, the DOL issued three new opinion letters, two of which deal with additional questions under the FLSA. (The third addresses employee counting requirements for a public entity employer for purposes of satisfying one of the eligibility requirements for the FMLA).
The first letter deals with the question of calculating overtime when an employer offers a nondiscretionary, lump-sum bonus earned over a multi-week period (rather than during a specific pay period). The DOL opined that in the hypothetical scenario presented, a $3,000.00 bonus offered to employees who finish a 10-week training program and agree to sign up for an additional 8 weeks, the employer needed to include the bonus amount in the regular rate of pay for employees working a fluctuating amount of overtime during the 10-week training program as a “stay” bonus. The letter also explained that the employer could divide up the bonus equally for each of the 10 weeks for this purpose.
The second letter addressed whether per-project payments could satisfy the salary basis test for purposes of employees classified under the administrative and professional exemptions from the FLSA’s minimum wage and overtime requirements. The letter addressed two different hypothetical per-project payment options and ultimately found both would satisfy the salary-basis requirement – as long as the payments are regular and predetermined.
You can find the full versions of all three letters here (filter to “2020”).
DOL issues final rule updating joint employer regulations
Finally, just this past Sunday, January 12, the DOL announced yet another new rule, this time addressing the regulations applicable to determining joint employer status under the FLSA.
Sometimes, an individual employee performs work that benefits multiple entities. The final rule addresses when such entities may be considered “joint” employers of that individual for purposes of the FLSA – meaning that they may be jointly and severally liable for the employee’s wages or overtime pay. The biggest change to note? The DOL has adopted a new four-factor balancing test to determine joint employer status, and will now weigh the following factors to make the joint employment determination, considering whether a possible joint employer:
- Hires or fires the employee;
- Supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
- Determines the employee’s rate and method of payment; and
- Maintains the employee’s employment records.
The DOL has noted that no one factor (including the last factor) is alone enough to make an entity a joint employer – instead, it is a case-by-case and fact-specific analysis.
The DOL reports that, like the regular rate rule, revisions to these regulations were a long time coming – as these represent the first substantive revisions to these regulations in over sixty years.
The rule, which applies only to joint employer status under the FLSA (and not any other federal employment laws), will go into effect March 16, 2020. You can find the full text of the new rule (which will be published on the Federal Register January 16, 2020) here.
Curious about how the DOL’s new rulings might impact your business? Please contact a Troutman Sanders employment attorney for personalized guidance and advice.