Four New U.S. DOL Wage & Hour Opinion Letters

By Susan Milner Parrott

The federal Department of Labor (DOL) issued four new opinion letters last week that address various compliance requirements under the Fair Labor Standards Act (FLSA). In the accompanying press release, the DOL said that the letters “demonstrate the agency’s continued commitment to providing meaningful compliance assistance to help employees understand their rights and ensure that employers have the information they need to comply with federal labor laws.” 

20% limitation on “related duties” no longer applicable for tipped employees.  Of the four newly-issued opinion letters, the one that will affect the most employers is FLSA 2018-27. This letter clarifies when an employer may use the “tip credit” for paying an employee who has both tip-generating duties and related non-tip-generating duties, for example, a waitress who spends part of her time cleaning and setting tables. An employer may take a “tip credit” for certain employees and pay a reduced hourly wage ($2.13/hour), using the “tip credit” to make up the difference between the $2.13/hour and the current minimum wage of $7.25/hour.  (29 U.S.C. § 203(m)). Previous DOL guidance provided that if an employee spent more than 20% of his or her work time on non-tip-generating “related duties,” then the employer could not use the tip credit for the time spent on those related duties. By means of the new opinion letter, the DOL withdraws the 20% rule. Going forward, the DOL will not “place a limitation on the amount of duties related to a tip-producing occupation that may be performed, so long as they are performed contemporaneously with direct customer-service duties.” In addition, the opinion letter provides guidance on how an employer can determine whether a particular duty is part of a “tipped occupation.”

A company that operates and maintains swimming pools may be an “amusement or recreational establishment,” exempt from minimum wage and overtime.  In FLSA 2018-26, the DOL opined that a company that operates and maintains swimming pool facilities at hotel, motel, apartment, and condominium buildings could come within the minimum wage and overtime exemption provided for “amusement and recreational establishments.” (See 29 U.S.C. §213(a)(3)). The DOL stated that in order to satisfy the applicable requirements, the company’s pools must be physically separated from the hotel, motel, apartment, or condominium, such as on a rooftop or in a “distinct physical space used exclusively for pool-related operations.” And, the pools must be “generally accessible to nonresidents, not restricted to renters and property owners.” The last of the three requirements of §213(a)(3) ((1) the employer is “an establishment,” (2) “frequented by the public,” (3) “for its amusement and recreation”) was satisfied by the fact that the primary purpose of the business operation was operating an amusement or recreational facility—a swimming pool.

A professional employee was not paid on a salary basis if the guaranteed weekly salary did not have a “reasonable relationship” to his “usual earnings.” In FLSA 2018-25, the DOL addressed the requirements of 29 C.F. R. 541.604(b). That regulation provides that the requirement that an exempt employee be paid on a salary basis can be satisfied if the employee receives a guaranteed weekly salary of at least the required minimum amount and some additional compensation so long as a “reasonable relationship exists between the guaranteed amount and the amount actually earned.” In the facts presented, an engineering firm paid its professional employees a guaranteed weekly salary of $2,100 for 30 hours per week and paid $70/hour for each hour over 30. Because there were “usual earnings” of up to $3,760 per week, the DOL found that the usual earnings “materially exceed” the permissible ratio set forth in the regulation and, thus, the compensation scheme arrangement did not satisfy the requirement for payment on a salary basis.

Non-profit, volunteer fire departments were not “public agencies” entitled to partial overtime exemption. In FLSA 2018-24, the DOL found that certain nonprofit volunteer fire departments that contract with state municipalities and counties to provide fire protection services were not “public agencies” entitled to the partial overtime exemption provided in 29 U.S.C. § 207(k) because the fire departments were not “directly responsible to public officials or to the general public,” independently elected their boards of directors, and the relevant contracts designated them as independent contractors, not as state agencies. 

The DOL’s apparent willingness to respond to specific requests for opinion letters may be helpful for employers seeking guidance on whether particular practices comply with the FLSA. If you have questions about the new opinion letters or the process of requesting an opinion letter, please contact the Smith Anderson employment lawyer with whom you regularly work.


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