DOL clarifies FLSA coverage in opinion letters

By Margaret M. Clark Dec 15, 2005

The U.S. Department of Labors (DOL) Wage and Hour Division (WHD) recently issued a flurry of opinion letters that address various coverage and exemption issues under the Fair Labor Standards Act (FLSA).

Speaking of flurries, and just in time for the winter storm season, WHD Deputy Administrator Alfred B. Robinson Jr. addressed whether deductions from salary or accrued leave banks for absences attributable to inclement weather negatively affect the salaried status of exempt white-collar employees.

In FLSA 2005-41, the DOL concluded as follows:

    During office closures because of inclement weather, it is permissible for an employer both to substitute or reduce an employees accrued leave in partial- or full-day increments without destroying the salary basis of payment as long as the employee still receives pay equal to the guaranteed salary, and to direct exempt staff to take vacation or debit their leave account.

    If the employers offices remain open during inclement weather or other disasters, an employees absence is attributable to personal reasons and the employer may make full-day deductions from the employees pay without affecting the employees status. In addition, in these circumstances, the employer may direct exempt employees who fail to report to take vacation or leave bank deductions, or to use leave without pay for full-day absences.

    An employer may not make partial-day deductions from the pay of exempt employees who choose to stay home (that is, if the office is open) for less than a full day because of inclement weather even if they have no accrued vacation or other leave.

The FLSA requires covered employers to pay covered employees the applicable minimum wage and time and one half the employees regular rate of pay for hours worked in excess of 40 in a week.

The Depression-era statute contains a variety of exemptions for employers in certain industries and for certain categories of employees. Extensive revisions to regulations defining so-called white-collar exemptions for executive, administrative and professional employees were effective in August 2004. (For background and detailed information about the exemptions, see the FLSA Resource Page on SHRM Online.) Since that time, the WHD has stepped up its pace of issuing opinion letters, offering additional insight into its interpretation of the law and regulations.

While an employers failure to compensate a single individual properly may not have major consequences, FLSA violations that span one or more job classifications over a period of years can generate significant liability in back pay and liquidated damages. An aggressive plaintiffs bar has made FLSA class actions and multimillion-dollar settlements a regular feature on the employment law compliance scene in recent years. So employers understanding of precisely who is and who is not covered by the minimum wage and overtime provisions is critical.

Selected opinions among those issued this fall discuss issues involving FLSA coverage, the professional exemption and the administrative exemption.

Coverage issues

Church and Church Employee (FLSA 2005-12NA). An official in the WHDs Office of Enforcement Policy concluded that a churcha nonprofit organization that received no financial support from commercial ventures and had no employees engaged in interstate commerceis not an FLSA-covered enterprise, and that an employee holding both a salaried (culinary) and an hourly (janitorial) position with the church was not a covered employee.

A private nonprofit is not a covered enterprise where its charitable, religious or educational activities are not in substantial competition with other businesses, unless it is operated in conjunction with a hospital, a residential care facility, a school or a commercial enterprise operated for a business purpose, according to the opinion.

But employees of enterprises that are not covered under the FLSA still may be covered individually in any workweek in which they are engaged in interstate commerce, the production of goods for commerce, or closely related and directly activities such as making or receiving interstate telephone calls, shipping materials to another state, and transporting persons or property to another state. As a practical matter, the opinion stated, the WHD will not assert individual coverage of an employee who occasionally spends an insubstantial amount of time performing individually covered work.

Employees of Carpet and Upholstery Cleaning Establishments (FLSA 2005-44). Section 7(1) of the FLSA (29 U.S.C. 207(i)) provides an exemption from the statutes overtime pay requirements for employees of a retail or service establishment that meet the following conditions:

    Their regular rate of pay exceeds one and a half times the applicable minimum wage.

    More than half of their compensation for a representative period of at least a month represents commissions on sales of goods or services.

The FLSA does not define retail or service establishment, but DOL regulations (29 C.F.R. 779.3138) state that the establishment must engage in the sale of goods or services, that 75 percent of its sales must be recognized as retail in the industry and that not more than 25 percent of its sales may be for resale. In addition, 29 C.F.R. 779.318 lists four qualifying factors. The establishment must:

    Sell goods or services to the general public.

    Serve everyday needs of the community.

    Be at the end of a distribution chain and not part of a manufacturing process.

    Provide general public repair and other services for the publics comfort and convenience in daily living.

The deputy administrator concluded that carpet and upholstery cleaning establishments that launder, clean or repair fabric or clothing meet all four requirements and therefore may be covered by the retail or service establishment exemption if they meet all other parts of the definition.

In so concluding, the administrator withdrew opinion letters dated July 30, 1984, and Nov. 6, 1986, to the extent that they conflicted with his current interpretation.

Employees at a Summer Cam (FLSA 2005-48). Employees engaged in promotional activities at a summer sports camp were not covered by the FLSAs minimum wage overtime exemption for amusement and recreational workplaces under 29 U.S.C. 213(a)(3) because a sports marketing company hired by the campnot the camp itselfwas their employer. The sports marketing company did not qualify for the exemption, so the employees were not exempt on that basis. The administrator looked at whether the employees in question qualified for the FLSAs executive, administrative or professional exemptions. Finding that none of them earned the requisite minimum salary of $455 per week, the administrator concluded that the acts minimum wage and overtime provisions applied.

Professional exemption

Social Workers and Caseworkers (FLSA 2005-50). Assuming that an employers social workers were paid the required minimum salary, the administrator concluded that they could be FLSA-exempt learned professionals once their duties were evaluated on an employee-by-employee basis. On the other hand, the employers caseworkers did not meet the requirements for the learned professional exemption.

To qualify as learned professionals under 29 C.F.R. 541.301(a), employees primary duty must satisfy these three elements:

    The work must require advanced knowledge.

    The advanced knowledge must be in a field of science or learning.

    The advanced knowledge must customarily be acquired by a prolonged course of specialized intellectual instruction.

The social workers were required to have a masters degree in social work, drug and alcohol education, counseling, psychology, or criminal justice. They made independent decisions about individuals best course of therapy, developed treatment plans and used a variety of therapeutic approaches with clients. The administrator concluded that the social workers with masters degrees who work in the field of their degree will generally meet the criteria of the learned professional duties test.

Caseworkers were required to have a bachelors degree in social sciences and provided a variety of services such as supervision of volunteer services, adoptive placements and foster care services. In addition, they may provide supportive or training services, conduct assessments or home studies, or provide referrals. In some settings, they performed the same services as social workers in assessing client needs and providing therapy or counseling. The course of study for a bachelors degree in social sciences does not constitute the specialized academic training necessary to qualify an occupation for the learned professional exemption, the administrator concluded. Accordingly, the caseworkers are not exempt.

Substitute Teachers (FLSA 2005-39). Substitute teachers for kindergarten through grade 12 in a public school district potentially qualify as exempt under the professional exemption for teachers articulated in 29 C.F.R. 541.303. The exemption applies to employees with a primary duty of teaching, tutoring, instructing or lecturing in the activity of imparting knowledge and who [are] employed and engaged in this activity as a teacher in an educational establishment. Substitute teachers whose primary duty is teaching qualify for the exemption, but substitute teachers whose duties are unrelated to teaching do not. According to the administrator, there is no minimum educational or academic degree requirement for bona fide teaching professionals in educational establishments. So application of the exemption is not dependent on having a bachelors degree or a teaching certificate.

Beauty School Instructors (FLSA 2005-38). In the absence of evidence that a beauty school overseen by a nonprofit college qualified as an educational establishment and that its instructors have a primary duty of teaching, instructors of the school would not qualify for exemption as teachers. The deputy administrator concluded that the DOL considers the primary duty of teaching to include by its very nature, exercising discretion and judgment and that exempt teachers include teachers of skilled and semiskilled trades, in addition to regular academic teachers and others. But there was no evidence that the instructors spent more than 50 percent of their time performing exempt work or that the school was licensed by a state education agency or national accrediting organization for career schools.

Administrative exemption

Academic Advisers and Intervention Specialists (FLSA 2005-42). Assuming that they are paid the required minimum salary, academic advisers and intervention specialists at a community college qualify for the academic administrative exemption under 29 U.S.C. 213(a)(1) and 29 C.F.R. 541.204. That exemption specifically recognizes the exempt status of employees whose primary duty is to perform administrative functions directly related to academic instruction or training in an educational establishment or department or subdivision and expressly includes academic counselors who perform work such as administering school testing programs, assisting students with academic problems, and advising students concerning degree requirements. The individuals in question had primary duties that fit that description, so they qualified for the exemption, the administrator said.

Museum Curators (FLSA 2005-43). A museum curators duties were nonmanual and many of them directly related to the management or general business operations of the museum in question and the curator exercised discretion and independent judgment, the administrator reasoned. So assuming the curator was paid the required minimum salary, the curator qualified for the administrative exemption. The curator maintains the museums collection in accordance with museum management principles and practices, develops new exhibits and coordinates their display, solicits and evaluates additions to the museums collection (similar to purchasing, the administrator said), develops educational components to present information regarding the exhibits (marketing and public relations), assists in fund raising (related to finance and budget), coordinates the maintenance and operation of the museum building, manages museum special projects, and establishes and implements a volunteer tour guide program. Many of these duties involve discretion and independent judgment.

Staffing Manager for Temporary Agency (FLSA 2005-45). Staffing managers whose primary duties were to manage the function of providing temporary labor in clerical, accounting, human resource, computer and other office functions qualified for the administrative exemption, the deputy administrator concluded. The staffing managers in question confer with clients to evaluate their needs; negotiate the terms of placements; recruit, interview and hire employees; make staffing recommendations to client companies; and supervise the employees services to the client, including performance evaluation, promotion, counseling, discipline, transfer and termination. The staffing managers worked with little supervision, making their decisions and accomplishing their tasks without prior approval and with a broad range of discretion.

[T]he staffing managers perform work in the functional areas of personnel management, human resources and labor relations, the deputy administrator found. Thus, it appears that the staffing managers primary duty meets the requirement that such office or nonmanual work be directly related to the management or general business operations of the employers clients. The deputy administrator concluded that the staffing managers exercised the requisite degree of discretion and independent judgment.

According to information on the WHDs opinion letters home page, an opinion letter signed by the administrator (including the deputy administrator) of the WHD is an official ruling or interpretation of the WHD for purposes of the Portal-to-Portal Act (29 U.S.C. 259). Such rulings provide a potential good-faith reliance defense for violations of the FLSA. Opinions signed by other wage and hour officialsso-called non-administrator lettersare denoted by an NA following the opinion number. They do not constitute rulings or interpretations under the Portal-to-Portal Act.

Opinion letters explain requirements of the laws and regulations enforced by the WHD and how they apply to particular circumstances. Note, however, that the enforcement guidance may be affected by changes to the statute or the rules, and in response to new information, such as court decisions.

To be notified each time the opinion letter web page is updated with new opinion letters, interested persons can subscribe to the divisions free e-mail service. It is also possible to download the entire collection of opinion letters in PDF format.

Margaret M. Clark, J.D., SPHR is SHRMs manager of workplace law content.

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