The U.S. Department of Labor, Wage and Hour Division (WHD) announced that it issued two new opinion letters that address compliance issues related to the Fair Labor Standards Act (FLSA). As a review, an opinion letter is an official, written opinion by the Department’s Wage and Hour Division (WHD) on how a particular law applies in specific circumstances presented by the person or entity that requested the letter. The opinion letters issued are:
- FLSA2020-1: Addressing calculating overtime pay for a non-discretionary lump sum bonus paid at the end of a multi-week training period.
- The background: the employer informs its employees in advance that they will be eligible to receive a lump sum bonus of $3,000 if they successfully complete ten weeks of training and agree to continue training for an additional eight weeks. You acknowledge that the bonus is nondiscretionary. The employee does not have to complete the additional eig
ht weeks of training, however, to retain the lump sum bonus. - The opinion: As an initial matter, the lump sum bonus paid to your client’s employees must be included in the regular rate of pay as it is an inducement for employees to complete the ten-week training period. Because the employer pays the lump sum bonus to employees for completing the ten-week training and agreeing to additional training without having to finish the additional training, the lump sum bonus amount must be allocated to the initial ten-week training period. Based on the facts provided, it is appropriate for the employer to allocate the lump sum bonus of $3,000 equally to each week of the ten-week training period. Each week of the ten weeks counts equally in fulfilling the criteria for receiving the lump sum bonus, as missing any week (regardless of whether the employee worked overtime in that week) disqualifies the employee from receiving the lump sum bonus.
- The background: the employer informs its employees in advance that they will be eligible to receive a lump sum bonus of $3,000 if they successfully complete ten weeks of training and agree to continue training for an additional eight weeks. You acknowledge that the bonus is nondiscretionary. The employee does not have to complete the additional eig
- FLSA2020-2: Addressing whether per-project payments satisfy the salary basis test for exemption.
- The background: the company employs educational consultants to provide services to schools and school districts throughout the country. These educational consultants are assigned to projects lasting various periods of time. The Department of Labor assumed that educational consultants meet the duties tests of the administrative or
professional exemptions. The company will determine educational consultants’ compensation on a per-project basis regardless of the amount of time required to complete the project. The company will make payments for the project in “equal pre-determined installments” biweekly or monthly. The company provided two examples with the opinion request.
- Example 1: for developing a new literacy curriculum, the educational consultant will receive a predetermined amount in 20 biweekly installments paid throughout the district’s academic year. That the amounts of these payments will not vary from week to week or month to month based on the number of hours worked by the consultant on the project and, for purposes here, the DOL presumed they will not vary based on the quality of the work performed. As a result, this payment structure satisfies the requirement that employees be paid a predetermined amount constituting all or part of the employee’s compensation” paid weekly or less frequently, provided the payments are not subject to reduction because of variations in the quality or quantity of work performed.
- Example 2: the same educational consultant in example 1, is assigned to a second eight-week assignment (Project Two) while continuing to work on the original assignment. For completing the second project, in addition to payments received for work on the first project, the consultant will be paid $6,000 in four $1,500 biweekly installments, for a total of $5,500 per pay period during the eight weeks in which the projects overlap. The employer’s payments for the second project also satisfy the requirements as “extra” compensation under the regulations.
- The Opinion: Both examples met the requirements for payments under the salary basis rule.
- The background: the company employs educational consultants to provide services to schools and school districts throughout the country. These educational consultants are assigned to projects lasting various periods of time. The Department of Labor assumed that educational consultants meet the duties tests of the administrative or