Tammy’s Top 10 Q&A’s: A Wage and Hour Report

During our February 15, 2022 webinar, A Wage and Hour Report: DOL Developments in 2021 and Looking Forward to 2022, we received a lot of great questions. The most popular and need-to-know questions are below.

*The information on this page is not legally binding advice, if you have questions, please seek advice of counsel*

  1. Are the independent contractor guidelines from the last administration still in effect?

    The only current guidelines on independent contracting by DOL is Fact Sheet #13, available here: https://www.dol.gov/agencies/whd/fact-sheets/13-flsa-employment-relationship. This fact sheet was in effect before the Trump regulations and was re-posted on the DOL website when those regulations were rescinded.

    Also of interest, especially if David Weil is confirmed as wage and hour administrator, is his now withdrawn Administrator’s Interpretation 2015-1, which you can find here: https://www.blr.com/html_email/ai2015-1.pdf. Although this interpretation has not been reinstated, it does state Dr. Weil’s views in 2015, and those views are not likely to have changed.

    You should apply these two documents when determining whether your workers can be properly classified as independent contractors. Please don’t forget, however, that states have their own laws and standards–sometime different standards under different laws (tax v. workers comp v. unemployment v. wage-hour). Navigator IC provides a risk assessment under both the federal and state laws and is your best option when reviewing your classifications.

  2. If the DOL increases the minimum salary level for exemption, will we see any allowance/pro-rating for part-time employees?

    I was asked for pro-rating in 2004 and commenters asked again in 2016.  DOL declined both times as doing so is unnecessary as, by definition, part-time employees do not work over 40 hours per week, and thus are not due any overtime. If your part-time workers are regularly working more than 40 hours, you may have more serious issues such as eligibility for benefits and Affordable Healthcare liability.

  3. If a tipped employee works 40 hours in one week, but spends two hours of the 40 folding napkins, for example, are they are entitled to their minimum wage per hour?

    The new regulations require payment of minimum wage when the tipped employee performs tip-supporting work for 30 or more consecutive minutes, or more that 20% of hours worked in a week. Thus, the time spent folding napkins would have to be more than 30 consecutive minutes in a day, as 20% of a 40-hour workweek is 8 hours. To learn more about the limits to non-tipped work, visit www.dol.gov/agencies/whd/flsa/tips.

    For other questions on tipped versus non-tipped work, you can find the revised tip credit regulations at 29 CFR Part 531, available here: www.law.cornell.edu/cfr/text/29/part-531/subpart-D. 29 CFR 531.56(d) defines tip-producing work as “work performed by a tipped employee that provides service to customers for which the tipped employee receives tips” and “directly supporting work” is defined as “work performed by a tipped employee in preparation of or to otherwise assist tip-producing customer service work.”

  4. Some employees take their work cellphone home and answer calls after working hours. Currently, we are paying two hours per day for this activity. Can we pay them the time they spend on the call instead?

    Under the FLSA, you need not pay employees for being “on-call” unless their activities are so restricted that they cannot pursue personal activities. Of course, you do need to pay the employees for actual time spent answering a call. In this situation, unless your restricting employee too much, you are in compliance with the FLSA as long as an employee does not spend more than 2 hours per day answering calls. If they spend more than 2 hours, you have a compliance issue. The best practice is to track and pay for the time the employees spend answering calls. On-call time is a complicated issue and can differ under state law. That is why we build Navigator On-Call in our Pay Practices application, which allows our users to quickly determine whether an employee needs to be paid for on-call time.

  5. Are companies using a managed services provider protected from joint employer and independent contractor misclassification allegations?

    Using a third-party company to provide workers or manage your HR practices cannot protect you from independent contract allegations, as your company and the service provider may be joint employers. If you are joint employers, and the service provider misclassifies employees as independent contractors, you company is jointly liable under the FLSA for those violations. The benefit of such relationship is the additional hurdle to liability–the DOL or the employee must establish both joint employment and independent contractor misclassification. But even more important is that you can ensure an indemnification clause in your agreement with the service providers ensures they are responsible for any liability resulting from their own pay practices.

    Joint employment is a complicated issue. In general, when two or more employers are found to jointly employ an employee, both employers are jointly and severally liable for compliance with the FLSA. Yes, your company can be held liable for FLSA violations of another employer you viewed as a business partner, but not a related company. With the recission of the Trump Administration regulations, there is little DOL guidance on joint employment. However, and especially if David Weil is confirmed as the wage and hour administrator, you should apply his 2016 Administrator’s Interpretation on joint employment. Although withdrawn by DOL in 2017 and not yet reinstated, you can find the interpretation, which states that joint employment “should be defined expansively,” here: www.hallrender.com/wp-content/uploads/2016/01/DOL_Joint_Employment_1_20_16.pdf.

  6. Are we still allowed to have arbitration agreements, or should we eliminate them from our hiring packet?

    Employers may have arbitration agreements, and such agreements will apply to private FLSA single-plaintiff and class action litigation. However, the DOL will not honor those agreements because a New York court found that the DOL is not a party to these arbitration agreements and not bound by them. Thus, your arbitration agreements with employees will not stop the DOL from conducting an FLSA investigation or assessing back wages on an individual or class-wide basis. Nonetheless, you should keep your arbitration agreements with employees as they do provide protection in private litigation.

  7. If bonuses for non-exempt employees are calculated using overtime paid during the performance period, does the regular rate of pay and retro incremental overtime still need to be calculated and paid?

    Additional overtime does need to be calculated and paid to non-exempt on most bonuses, but not for exempt employees.

  8. I struggle with the definition of discretionary and non-discretionary bonus to use on the calculation of regular rate of pay for overtime. Are sign-on and referral bonus discretionary if we pay them after 6 months of employment?

    A good resource for understanding when a bonus is discretionary and thus does not require payment of overtime is DOL’s Fact Sheet #56C, available here: https://www.dol.gov/agencies/whd/fact-sheets/56c-bonuses.

    Also important is the preamble to the DOL’s 2019 final regular rate regulations, available here: https://www.govinfo.gov/content/pkg/FR-2019-12-16/pdf/2019-26447.pdf. The fact sheet states that referral bonuses to employees not primarily engaged in recruiting activities is discretionary. DOL discussed sign-on bonuses at page 68750-51 of the preamble to the December 2019 final rule, stating that sign-on bonuses are discretionary as long as there is no claw-back provision, e.g., requiring employers to pay back the bonus unless they remain employed for a certain amount of time.

  9. In the 2004 changes to the FLSA, the DOL highly suggested that employers who have handbooks should include a policy statement on paying exempt employees. Is that still in effect?

    Yes, the 2004 regulations created a safe harbor provision for salary basis violations, which is still in effect at 29 CFR 541.603. If an employer makes improper deductions from the salary of exempt employees, the exemption can be lost for that employee, and all similarly situated employees, resulting in liability for unpaid overtime. Under this rule, the employer will not lose the exemption if it has a policy that prohibits improper deductions, including a complaint mechanism, and reimburses the employee for any improper deductions. DOL created and posted a model policy in 2004, which can still be found here: https://www.dol.gov/agencies/whd/overtime/exempt-model-policy.

  10. We work in construction, and we can’t always take our break at a designated time. Can down time count as a break? For example, if an employee is working on the streets at an intersection, and they are sitting in their truck eating an apple, playing solitaire on their phone, waiting for a concrete truck to arrive, can that be considered a break?

    Federal law does not require meal or rest breaks, but rather only governs when a break must be paid or may be unpaid. Breaks of 20 minutes or less must be paid while breaks of 30-minutes or more may be unpaid if the employees are completely relieved of duty. The answer to your question, then, depends on the amount of time the employee is sitting in a truck: if less than 20 minutes, the employee must be paid for that time.

    Also, an issue, is whether the employee is sitting in a personal vehicle or the company’s equipment. Plaintiffs have claimed that employees must be paid if required to sit in company-owned vehicles. For state law requirements on meal and rest breaks, our Navigator M&R application within Navigator Pay Practices can help you quickly assess your meal and rest break obligations.

About the Webinar:
The Department of Labor (DOL) recently released its enforcement statistics for last year, while the Senate HELP committee sent President Biden’s Wage and Hour Administrator nominee to the full Senate, setting up a confirmation vote. Tammy McCutchen, Strategic Advisor of ComplianceHR and former DOL Wage and Hour Administrator, will reflect on the DOL developments from 2021 and discuss what changes employers should expect in 2022. During this hour-long webinar, Tammy will discuss:

  • The Wage and Hour Division 2021 Annual Report
  • The nomination of David Weil for Wage and Hour Administrator
  • A look ahead to 2022
  • The wage and hour ABC: “Always Be Complying”

During this presentation, we will also dive into Navigator Independent Contractor, which assesses roles at your company for independent contractor risk, and Navigator Overtime, which helps your organization determine the exemption status of employees. Additionally, we will be offering a complimentary, one-on-one demonstration of our software. After attending this demonstration, you will gain access to a full two-week trial of the Navigator Suite.