U.S. Department of Labor’s Wage and Hour Division

On March 14, 2019, the U.S. Department of Labor’s Wage and Hour Division (“WHD”) released two opinion letters concerning the Fair Labor Standards Act (“FLSA”). One letter addresses the interplay between New York State’s overtime exemption for residential janitors (colloquially referred to as apartment “supers”) and the FLSA, which does not exempt such employees, and the other addresses whether time spent participating in an employer’s optional volunteer program constitutes “hours worked” requiring compensation under the FLSA.

While these opinion letters may not apply to all employers, they discuss general legal principles of broad applicability and so should be studied closely. In particular, these opinion letters are a useful reminder that (1) compliance with state law does not excuse noncompliance with the FLSA and generally will not constitute a good faith defense, and (2) when an employer directs or pressures an employee to volunteer, such as imposing consequences for not volunteering or guaranteeing a bonus for volunteering, volunteer time will likely constitute “hours worked” under the FLSA.

New York’s Residential Janitor Exemption:

In Opinion Letter FLSA 2019-1, the WHD addressed the interplay between federal and state minimum wage and overtime law in the context of live-in superintendents exempt from state minimum wage and overtime requirements under New York’s “residential janitor” exemption.

Starting with general legal principles, the WHD advised that when federal wage and hour law diverges from state or local law, the employer must comply with both laws and meet the standard of whichever law gives the employee the most protection.

The WHD then confirmed that the FLSA offers no analogue to New York’s residential janitor exemption, and that employers cannot rely on this or other state law exemptions from state law minimum wage and overtime requirements to establish a good faith defense to noncompliance with the FLSA.

But the WHD’s analysis did not end there. It explained that when an employee resides on the employer’s premises either permanently or for extended periods of time (whether as a building superintendent or otherwise), not all of the employee’s time at the residence is necessarily “hours worked” under the FLSA.

Here, the WHD cited the longstanding principle that time an employee spends on the premises eating, sleeping, entertaining or engaging in his own pursuits, free from any job-related duties, is not hours worked under the FLSA and need not be compensated. To reduce confusion about when an employee is actually working, the parties can establish a “reasonable agreement” establishing which hours on the premises are hours worked, thereby eliminating the need for precise recordkeeping of work hours. 

Participation in Employer-Sponsored Optional Volunteer Program:

 In FLSA 2019-2, the WHD examined employee participation in an employer’s optional community service program, pursuant to which employees were compensated for the time they spent volunteering during working hours or while they were required to be on the employer’s premises but were not compensated for hours that they spent volunteering outside of normal working hours (which occurred frequently). At the end of the year, those employees with the greatest community impact, decided, in part, based on the total overall hours each employee volunteered, receive a monetary award.

Relying on several previous opinion letters concerning volunteer activities, the WHD concluded that participation in the described program does not count as hours worked under the FLSA because:

  • The employer does not require participation in the program nor control or direct volunteer work;
  • Employees do not suffer adverse employment consequences if they do not participate in the program;
  • The employer does not guarantee participating employees a bonus for volunteering; and
  • The employer does not pressure its employees to participate in the program.

The WHD also confirmed that an employer can use a mobile device application to track a participating employee’s time spent volunteering and determine which team’s volunteering has the greatest community impact, provided that this application is not used to direct or control the volunteering activities.

As we previously shared in this blog, the U.S. Department of Labor’s Wage and Hour Division (“WHD”) issued an opinion letter in November 2018 changing the Department’s position regarding whether and when an employer with tipped employees, such as a restaurant, can pay an employee a tipped wage less than the federal minimum wage.

The issue was whether an employer must pay a tipped employee the full minimum wage for time spent performing what the industry calls “side work”: tasks such as clearing tables or filling salt and pepper shakers that do not immediately generate tips.

The Department concluded that, under federal law, there is no limit on the amount of time a tipped employee can spend on side work while still receiving a tipped wage so long as the employee also performs the normal tip-generating activities of the role at or around the same time. The Department indicated that the opinion letter supersedes the Department’s prior guidance on the topic, contained in section 30d00(f) of the WHD Field Operations Handbook (“FOH”), and that “[a] revised FOH statement will be forthcoming.”

On February 15, 2019, the Department issued two new guidance documents reflecting the Department’s updated enforcement position:

  • First, a revised FOH section 30d00(f) consistent with the November 2018 opinion letter now appears on WHD’s website.
  • Second, Acting WHD Administrator Keith Sonderling issued Field Assistance Bulletin No. 2019-2 explaining the reasons for the change in policy, including noting that the Department’s “prior interpretation created confusion for the public about whether” the law “requires certain, non-tipped duties to be excluded from the tip credit.” This bulletin instructs WHD’s staff to apply the revised FOH principles not only to work performed after the issuance of the opinion letter but also “in any open or new investigation concerning work performed prior to the issuance of WHD Opinion Letter FLSA2018-27 on November 8, 23018.” (Emphasis added.)

This new guidance finishes what the November 2018 opinion letter set in motion—removing the prior interpretation from the FOH, promulgating the current interpretation, and declaring that the current position applies both prospectively and retroactively.

True to its promise last year, the U.S. Department of Labor’s Wage and Hour Division (the “WHD”) continues to issue a steady stream of opinion letters designed to offer practical guidance to employers on specific wage and hour issues solicited by employers. This past week, the WHD issued two new opinion letters concerning the Fair Labor and Standards Act (“FLSA”), where one addresses an employer’s hourly pay methodology vis-à-vis the FLSA’s minimum wage requirement, and the other the ministerial exception to the FLSA. While not universally applicable, employers should consider the general principles set forth in these opinion letters, and then further research the underlying relevant regulations and the DOL’s interpretive guidance to more fully understand the basic requirements to ensure legal compliance.

Varying Average Hourly Rate:

In Opinion Letter FLSA2018-28, the WHD examined a compensation plan in which a home-health aide employer paid employee aides on an hourly basis for each of their client appointments. While the employer did not specifically pay aides for their travel time between client locations, the hourly rate they received for the client appointments was sufficiently large enough when averaged among all hours worked, including travel time, to satisfy the minimum wage requirements of the FLSA. Specifically, the employer multiplied each employee’s time with clients by his or her hourly pay rate (typically $10 per hour) and then divided the product by the employee’s total hours worked (which includes both the client time and the travel time). Employees who work over 40 hours (including travel time) in any given workweek are paid time and one-half for all time over 40 hours based on a regular rate of $10.00.

Based on these facts, the WHD concluded that this payment scheme complies with the FLSA’s minimum wage requirements, reaffirming the principle that an employee’s average hourly rate can vary from workweek to workweek as long as it exceeds the FLSA’s minimum wage requirements for all hours worked. On the issue of overtime pay, however, the WHD cautioned that the employer’s compensation plan may not comply with the FLSA because the employer assumed a regular rate of $10 when, in fact, certain of its employees have actual regular rates of pay greater than $10. In other words, the regular rate cannot be arbitrarily selected; it must be based on an actual “mathematical computation.”

Ministerial Exception:

In Opinion Letter FLSA2018-29, the WHD advised that members of a Christian cooperative who share all personal property and funds and work for the organization, either in the schools, kitchens, or laundries or for two onsite non-profits that generate income for the organization, are not “employees” under the FLSA. As a preliminary matter, the WHD emphasized that the members of the cooperative do not expect to receive compensation for their services, which is the hallmark of an employment relationship.   The WHD further reasoned that the organization’s members are similar to nuns, priests, and other members of a religious order who work for church-affiliated entities, who typically fall within the FLSA’s ministerial exception. The WHD reasoned that like priests and nuns, the members of the religious cooperative share resources, gather for communal meals and worship, and provide for their own education, healthcare, and other necessities. In light of these similarities and the absence of any expectation of compensation, the WHD determined that the members of the cooperative were not employees for purposes of the FLSA.

The Opinion Letter further noted that the fact that some members work for non-profit, income-generating ventures did not alter the WHD’s conclusion. Relying on U.S. Supreme Court precedent exempting religious activities from the FLSA’s reach, the WHD explained that the members consider the work indivisible from prayer and reiterated that individuals can work for entities covered by the FLSA without being deemed employees under the FLSA.