The Department of Labor (DOL) has been busy lately. In addition to the proposed change in the salary threshold for overtime exemption (which we reported last month in Labor Department Officially Announces Proposal For Increased Minimum Salary for Exempt Workers), the DOL has now announced proposed changes in calculating the regular rate of pay for overtime and determining joint employer status.
In their spare time, the DOL also threw in an Opinion Letter on whether time spent on charitable work constitutes working hours that are counted toward overtime.
Regular Rate of Pay
The DOL issued a Notice of Proposed Rulemaking to revise and clarify what constitutes the regular rate of pay for the purpose of calculating overtime pay. This issue has not been addressed for 50 years so some updating is probably overdue.
The regular rate of pay for a week in which overtime is worked generally includes commissions, non-discretionary bonuses and other fixed payments. Employers often struggle, however, with whether they also need to include other forms of pay received during the week. The proposed rule clarifies much of this by announcing that the following items need not be included in calculating the regular rate of pay for an overtime week:
– The cost of providing wellness programs and fitness initiatives;
– Employee discounts on retail goods and services;
– Payments for unused paid leave;
– Reimbursed expenses, even if not incurred solely for the employer’s benefit;
– Reimbursed travel expenses;
– Discretionary bonuses, including examples to provide clarity;
– Benefit plans, including accident, unemployment, and legal services;
– Tuition programs, such as reimbursement programs or repayment of educational debt;
– Pay for time that would not otherwise qualify as hours worked, including bona fide meal periods.
The proposed rule also calls for changes in certain calculations, including how “call back” pay is treated and how “basic rate” payments are handled.
This is just the beginning. Nothing will happen for at least 60 days during which the public may comment on the proposed changes. The DOL then has to review and consider the comments, then publish a final Notice of Rule Making. We will keep you up to date.
Joint Employment
The DOL also announced a proposed rule to clarify their stand on joint employer arrangements. Joint employers are mutually responsible for a worker’s wages and overtime payments.
To determine whether a second entity is a joint employer of a particular worker, the proposal lists a four-factor test to ascertain the entity’s control over the worker. The factors are:
– Does the entity have the right to hire or fire the individual?
– Does the entity have the right to supervise and control the individual’s work schedules or conditions of employment?
– Does the entity have the right to determine the individual’s rate and method of payment?
– Does the entity maintain the individual’s employment records?
The proposal then sets out scenarios on how this proposal might work and asks for public comment. The scenarios include a cook working for two different restaurants of the same national franchise, an office park giving work direction to the employees of the janitorial service that cleans the park, and a packaging company setting pay and working hours for workers brought in from a staffing agency.
Public comment will be taken for 60 days following official announcement of the proposed rule (which has not yet occurred).
Opinion Letter on Charitable Activities
An employer asked the DOL whether they must count as working time the hours that employees spend working for community service projects selected by the employees themselves. The employer pays the employees for this time as a way to encourage charitable work in the community.
The DOL’s Opinion Letter responded that this time is not considered compensable working time if it is truly voluntary, not directed by the employer and not subject to a guaranteed bonus for participation. Even though the employer benefits by the creation of good will and a positive public image, these activities are sufficiently charitable to take them outside the realm of compensable work.
In this particular instance, the DOL noted that the employer:
– did not require participation in the program;
– did not control or direct the volunteer work;
– did not create any adverse consequences for failing to participate in the program; and
– did not guarantee bonuses to participating employees (bonuses were instead issued to the most successful community service team).
Thus, since the employer did not “unduly pressure its employees to participate” (thereby demonstrating employer control), the hours spent on community service was not compensable.
Bottom Line
After a couple of years of relative dormancy following the 2016 election, it appears that the DOL is becoming more active. Stay tuned for further developments.