DOL Overtime Calculation and Joint Employer Proposals

By Lehr Middlebrooks Vreeland & Thompson, P.C.

April 29, 2019

This article was prepared by Lyndel L. Erwin, Wage and Hour Consultant for the law firm of Lehr Middlebrooks Vreeland & Thompson, P.C. Prior to working with the firm, Mr. Erwin was the Area Director for Alabama and Mississippi for the U. S. Department of Labor, Wage and Hour Division, and worked for 36 years with the Wage and Hour Division on enforcement issues concerning the Fair Labor Standards Act, Service Contract Act, Davis Bacon Act, Family and Medical Leave Act and Walsh-Healey Act. Mr. Erwin can be reached at 205.323.9272.

Recently, the Department of Labor continued its process of proposing revisions to some of the Fair Labor Standards Act regulations that are administered by Wage Hour. One proposal was issued in late March while the other was released in early April. One deals with procedures to determine “joint employment” while the other regulation deals with how an employer is to determine the “regular rate” when computing overtime where an employee works in excess of 40 hours a week.

On April 1, 2019, the DOL announced a proposed rule to revise and clarify the responsibilities of employers to employees in joint employer arrangements. The Department stated there has not meaningful revisions to these regulations since 1958. DOL states the proposal would help employers and joint employers clearly understand their responsibilities under the Fair Labor Standards Act. Although Wage Hour issued some guidance in the area in 2017, the current administration does not believe that information was properly issued as it did not go through the rulemaking process that includes public notice and comment.

The proposed regulation proposes a clear, four-factor test which they state is based on “well-established” precedent. The factors they would consider is whether the potential joint employer actually exercises the power to:

1. Hire or fire the employee;
2. supervise and control the employee’s work schedules or conditions of employment;
3. determine the employee’s rate and method of payment; and
4. maintain the employee’s employment records.

The proposal also includes an extensive list of examples that would further help to clarify joint employer status. Wage Hour has a dedicated webpage to this topic with helpful links to the Notice of Proposed Rulemaking (NRM) itself, a press release, a fact sheet, and examples. The NPRM was published on April 9, 2019 in the Federal Register. For the next 60 days, interested parties may submit comments, both online as well as in writing. A link to the proposal is also available on the website. In order for comments to be considered they must be submitted by June 10, 2019. Only comments received during the comment period will be considered part of the rulemaking record when determining the final regulation. The Department indicates they will consider all timely comments in developing the final rule.

On March 2, the DOL published in the Federal Register proposed clarifications to the procedure for determining the “regular rate” that must be used when computing an employee’s overtime premium compensation. The Department believes that the current regulations discourage employers from offering certain additional perks as these perks may need to be included in the regular rate. Following are proposed clarifications to confirm that employers may exclude the following from an employee's regular rate of pay:

• The cost of providing wellness programs, onsite specialist treatment, gym access and fitness classes, and employee discounts on retail goods and services;
• payments for unused paid leave, including paid sick leave;
• reimbursed expenses, even if not incurred "solely" for the employer's benefit;
• reimbursed travel expenses that do not exceed the maximum travel reimbursement under the Federal Travel Regulation System and that satisfy other regulatory requirements;
• discretionary bonuses, by providing additional examples and clarifying that the label given a bonus does not determine whether it is discretionary;
• benefit plans, including accident, unemployment, and legal services; and
• tuition programs, such as reimbursement programs or repayment of educational debt.

The proposed rule also includes additional clarification about other forms of compensation, including payment for meal periods, "call back" pay, and others.

The main webpage for all things related to these proposals is available here. There you will also find a link to the actual document as published in the Federal Register on March 29, 2019. The proposal provides that interested parties may submit written comments, either online or by mail, until May 28, 2019. All comments received by that date will be reviewed and considered when developing the final regulation.

I expect the Department will receive several hundred thousand comments either online or by mail. Consequently, it will take them an extended period to review and consider the submissions when developing the final regulations. Therefore, I expect it will be several months (maybe extending into 2020) before they issue any final regulations. Once the final regulations are issued, they normally have at least a 60-day delay prior to the regulations becoming effective. You can expect there will be extensive publicity when each of the regulations are issued and that should give you sufficient notice to implement any necessary changes in your pay practices.

In addition to the two proposed regulation changes there were three additional Opinion Letters released by Wage Hour during this month. Copies of all of the opinion letters issued in recent years are also available on the Wage Hour website.