By: Julia Turner Baumhart, Kienbaum Opperwall Hardy & Pelton, P.L.C
DOL Wage & Hour Stepping Up Reliance on Opinion Letters
The Trump Administration’s reinstatement of Wage & Hour Division Opinion Letters – a practice suspended during the Obama Administration – is gaining momentum. On November 8, 2018, the Department of Labor issued four Opinion Letters on a variety of topics ranging from tipped employee wage credits to much narrower topics.
The most encompassing Opinion Letter – that dealing with tip credits under the Portal-to-Portal Act – reissued a letter issued in the closing moments of the George W. Bush Administration that the successor administration promptly mothballed. The new letter – FLSA 2018-27 – reissued the old letter virtually verbatim to distinguish between tipped employees in dual jobs (where one job is a tipped occupation but not the other) and tipped employees who perform both tip-generating and non-tip generating duties.
In the case of dual jobs, the letter clarifies what should be common sense: the employer may take a tip credit only for those hours spent performing the tipped job. The letter provides the example of the hotel maintenance employee who also serves as a hotel waiter. The FLSA would require the hotel to pay minimum wage for any hours worked in maintenance but allow the hotel to take advantage of a tip credit for hours spent as a waiter – a bright line test.
The standard applied to tipped employees who also perform non-tipped duties presents a much fuzzier line. The letter provides the example of the waiter who also spends time in non-tip generating duties such as cleaning and setting tables, toasting bread, making coffee, occasionally washing dishes or glasses, or vacuuming before or after closing. Earlier guidance implied that, under the above circumstances, any allocation of non-tipped duties that exceeded 20 percent of working time could not be eligible for a tip credit.
Opinion Letter 2018-27 rejects the 20 percent ceiling on non-tipped duties as imposing an unrealistic burden to monitor and track minute-by-minute job performance. Rather, the new standard allows credit for duties listed as core or supplemental to the specific tip-producing occupation on the Occupational Information Network (O*NET) or in 29 C.F.R. § 531.56(e), provided the duties are performed contemporaneously with or immediately before or after duties directed at serving customers. The specific occupational duties considered core or supplemental for each tipped occupation can currently be found at https://www.onetonline.org/ link/summary/35-3031.00.
Another November 8 Opinion Letter, FLSA 2018-25, addresses when exempt salaried employees may receive additional hourly compensation for hours worked without endangering the exemption. The opinion letter addresses engineers and senior designers, classified as professional salaried employees, who receive a guaranteed weekly salary of $2,100, regardless of the number of hours worked during the week. However, those employees also could earn $70 for every hour worked in excess of 30 per week. As a result, some engineers were earning a weekly average salary of up to $3,761.
Opinion Letter 2018-25 provides that the guaranteed weekly – or “usual” – salary has to bear a reasonable relationship to the amount actually paid. A reasonable relationship exists provided the average weekly salary does not exceed 1.5 times the usual salary. Moreover, the ratio has to be determined on an employee-by-employee basis. Under the circumstances presented, the usual or guaranteed salary of $2,100 per week would support an average actual salary of up to $3,150. Presumably, then, the employer would need to increase the usual or guaranteed weekly salary of any engineer or senior designer whose average actual salary exceeded $3,150 to avoid endangering the exempt status of that employee.
The remaining two opinion letters deal with narrower topics. One addresses when swimming pool or similar recreational operators supporting multi-faceted operations, such as hotels and apartment complexes, are entitled to claim relief from wage and hour laws as seasonal amusement or recreational establishments. For this to occur, according to FLSA 2018-26, those in the employer’s employ must work at (1) an establishment; (2) frequented by the public, including for a non-prohibitive fee; (3) that is for amusement and recreation.
The fourth letter is narrower still, answering the question of whether a nonprofit, private volunteer fire department contracting with a state or local government to provide fire protection services to the public can benefit from the partial exemption from overtime requirements applicable to employees of public agencies. This Opinion Letter, FLSA 2018-24, concludes that private fire departments that are not directly responsible to public officials or the general public and who are designated in their contracts as independent contractors do not qualify for the partial exemption. This is true even if the department receives partial funding from a state or locally imposed fee.
This e-blast was written by Julia Turner Baumhart, who is a member of the Detroit SHRM Legal Affairs Committee. Ms. Baumhart is a partner in the labor and employment firm of Kienbaum Opperwall Hardy & Pelton, P.L.C. in Birmingham, Michigan and can be contacted at email@example.com or (248) 645-0000.
Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information, is included in the re-post of the article. November 2018.