The Department of Labor issued two opinion letters on Tuesday in response to specific inquiries that may nonetheless provide some clarity for employers in general.
The first letter was in response to an inquiry from an employer that offers its employees a non-discretionary lump sum bonus of $3,000 (in addition to their regular hourly rate) for completing a 10-week training program. During the training program, the employees may work more than 40 hours in a given week and the employer requested an opinion from the DOL on the proper method for calculating overtime pay. In response, the DOL stated that the $3,000 bonus must be included in the regular rate of pay (for purposes of calculating overtime) “as it is an inducement for employees to complete the ten-week training period.” The DOL then explained that the bonus should be divided into ten $300 increments to be added to the employees’ pay for each week of the training program for purpose of making the overtime calculation.
The second letter was in response to a question regarding whether payments to consultants on a per-project basis constituted a salary for purposes of meeting the salary-basis exemption from overtime requirements under the Fair Labor Standards Act. The employer at issue employed consultants who received a regular paycheck that did not change with the quality or quantity of work performed, in excess of the minimum salary threshold, but whose pay could fluctuate in certain situations. For example, a consultant’s pay might increase if she took on a second project while working on the first or, on rare occasions, it might decrease if the employer and client renegotiated the consultant’s fee due to a change in the scope of the project moving forward. The DOL stated that in both instances the consultant’s compensation would likely meet the salary basis test for purposes of the overtime exemption. The DOL reasoned that the salary basis test was met in the first instance because the consultant received a guaranteed minimum amount that was in excess of the salary threshold and anything above that minimum would likely be deemed “extra” compensation, which is expressly allowed under the FLSA regulations. Regarding the occasional prospective decrease in pay, the DOL said that as long as the consultant’s compensation did not drop below the minimum salary threshold, and as long as the decreases did not occur with such frequency as to make the salary a de facto hourly rate (i.e. payment only for work performed), the exemption would remain.
Opinion letters are official, written opinions by the DOL’s Wage and Hour Division on how a particular law applies in specific circumstances. Although not legally binding on any court, opinion letters are a good indicator of how the DOL might respond to a similar issue in an enforcement action.