DOL Opinion Letters Explain Deductions, Bonuses, Exemptions

​The U.S. Department of Labor (DOL) Wage and Hour Division may be shifting its emphasis from enforcement to technical assistance, reissuing 17 opinion letters Jan. 5 that clarify the DOL's stance on salary deductions for full days off, bonuses and the administrative exemption from overtime.

Under the administrative exemption, when a salaried employee performs managerial work that involves making decisions on "matters of significance," he or she is exempt from overtime pay requirements.

In the waning days of the administration of President George W. Bush, the DOL issued 36 opinion letters, about half of which were set aside in the early weeks of the administration of President Barack Obama in 2009, noted Gerald Hathaway, an attorney with Drinker Biddle in New York City. In 2010, the Obama Wage and Hour Division announced that it would cease issuing opinion letters that answered companies' questions about wage and hour issues arising in their workplaces. The agency explained that it instead would publish interpretations of Fair Labor Standards Act (FLSA) topics of the Wage and Hour Division administrator's own choosing. But it issued few of these interpretations.

When the DOL stopped issuing opinion letters in 2010, it had such a backlog of company questions that it would have taken about five years to answer all of them, said Paul DeCamp, an attorney with Epstein, Becker & Green in Washington, D.C., and former administrator of the Wage and Hour Division.

In addition, the Obama administration "was more focused on enforcement initiatives than helping employers comply" with the FLSA, according to Robert Boonin, an attorney with Dykema in Detroit and Ann Arbor, Mich.

The recent reissuance of opinion letters "is very important because of the large number of gray areas employers and workers face in trying to understand the FLSA," DeCamp remarked. "Any clarification that DOL can provide helps."

However, Hathaway remains skeptical that more opinion letters may be forthcoming. "It is not at all clear that the DOL has in fact decided to start issuing opinions on a regular basis again, or is just taking the moment of its new status of having a Republican in the White House to undo the reversals of the Obama DOL," he stated.

Deductions for Full Days Off

In FLSA 2018-7, the DOL clarified that if an employee's full-day absence allows an employer to make a full-day salary deduction, the fact that the employee may have some paid time off (PTO), but less than a full day's worth, does not prevent the employer from docking the employee's pay by a day and then giving the worker the money available from the PTO that is left, DeCamp said.

First, an employer must ask whether it can dock salary, which it can for a personal day off. Second, the employer considers whether there is PTO to cover the docked pay. If there is, it's a wash, he noted. If there is no PTO, the employer can dock pay for the full day, he said.

But Brett Miller, an attorney with Butzel Long in Detroit, cautioned that there are pitfalls with using salary deductions. For example, there is the risk the employer will do this incorrectly and jeopardize an employee's exempt status. Also, employers would need to enforce the policy consistently to avoid discrimination issues.

"This can often backfire since exempt employees without attendance problems and who work weekends and late at night often become resentful that they are being docked PTO for a few hours missed during a weekday," he said. "It is usually better to discipline poor attendance than it is to mess with pay."

Bonuses

In FLSA 2018-9, the DOL clarified that a percentage-of-total-earnings, nondiscretionary bonus needs to apply the percentage only to remuneration includable in the regular rate of pay, which includes overtime. Earnings excludable from the regular rate include expense reimbursements, pay for holidays and vacations, and discretionary bonuses, DeCamp stated.

Don't select a round number, such as $250 or $1,000, for the bonus, DeCamp cautioned. That will give the impression that the employer predetermined the bonus amount, rather than applying a percentage, such as 1, 2 or 5 percent, he explained.

Administrative Exemption

Miller said the reissued opinions are significant for the number of decisions relating to the administrative exemption from overtime.

[SHRM members-only toolkit: Determining Overtime Eligibility in the United States]

One of the administrative exemption opinions that is meaningful for the health care staffing field is FLSA 2017-12.

"A hard question for health care staffing employers is the exempt status of nonprofessional employees who plan patient care," Hathaway observed. This opinion will allow employees that employers have had trouble fitting into the administrative exemption to be classified as exempt. Such workers include consultants who recruit employees, clinical coordinators who make sure that the right employees are being assigned to the right positions and business development managers who assess market opportunities.

Capture the Link to the Opinion Letter

The opinion letters are not binding; they are informal guidance, unlike regulations that solicit the public's input during a notice-and-comment period, reminded Jonathan A. Segal, an attorney with Duane Morris in Philadelphia and New York City.

"To maximize an employer's position in the event its practice is challenged, the employer may want to capture the link to the opinion letter in a discoverable e-mail or other document," he recommended. "The idea here is you want to be able to say to a judge who may disagree with the DOL, 'We can show you we relied on the DOL. Are you really going to rule against us?' "

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