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Washington Labor & Employment Wire » Department of Labor, Wage and Hour Division

DOL Clarifies FLSA Tip Credit, Declines to Amend Regulations Governing the Fluctuating Workweek

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            On Tuesday, April 5, 2011, the Department of Labor (DOL) published updated regulations to the FLSA that were intended to conform the Act to subsequent legislation. The regulations were initially proposed in 2008 under the Bush administration. While the final rule updates regulations regarding the tip credit to reflect an increase in the minimum wage and clarifies existing overtime exemptions for employees engaged in fire protection activities, the rule is more interesting for what it does not do. In response to negative comments from employee groups, DOL opted not to adopt changes that would have clarified that salaried, non-exempt employees could receive bonuses under the fluctuating work week method of compensating overtime. 

            In addition to raising the maximum federal tip credit to $5.12 per hour, the final rule eliminated the maximum contribution percentage on valid mandatory tip pools. Notably, however, the DOL did not adopt a proposed regulation clarifying that bona fide bonus or premium payments do not invalidate the fluctuating workweek method of compensation. This proposal had been supported by the Chamber of Commerce, among other pro-employer entities. Commenters opposed to the proposed rule argued that it would allow employers to reduce employees’ fixed weekly salaries and instead provide compensation primarily through bonus and premium pay. The DOL noted that “in general, commenters representing employers favored the revisions while commenters representing employees strongly opposed the revisions.”

            DOL had also proposed a change to clarify that under section 7(o) of the FLSA, states and local governments that grant employees compensatory time off instead of cash overtime compensation must allow employees to use the compensatory time off on the date requested absent undue disruption to the agency. This clarification was not adopted in the final rule, but DOL reiterated that it maintains its longstanding position that employees are entitled to use compensatory time on the date requested. The final rule also does not include several other provisions originally proposed including providing an overtime exemption for service managers, service writers, service advisers, and service salesman; a regulation that allows an employer to take a meal credit even where the employee does not accept the meal voluntarily; and, examples of when pay is not required for employees who use their employer’s vehicle in home-to-work commuting.

President Obama Proposes Overall Budget Cut for Department of Labor in FY2012, Increase for OSHA

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On February 14, the Obama administration unveiled a $108.5 billion proposed budget for the Department of Labor for fiscal year 2012. The proposed budget would reduce DOL’s total budget by $40 million from the fiscal year 2011 budget, which is currently being funded by a recently enacted continuing resolution that will expire early next month.

The administration’s FY2012 budget calls for a significant increase for worker protection programs, including $240 million for the Wage and Hour Division (WHD), up from its current budget of $227.6 million. The budget allocates almost $50 million to a new multi-agency misclassification initiative aimed at coordinating federal and state efforts to combat the misclassification of employees as independent contractors. WHD’s budget includes $15 million for such misclassification investigations.

Notably, the budget requests $583.4 million for the Occupational Safety and Health Administration, an increase of a $24.8 million, or 4.4 percent, from fiscal year 2011. OSHA’s standard-setting directorate would receive $26 million, an increase of $36.8 percent from current funding levels. This $7 million increase includes $2.4 million to continue developing OSHA’s Injury and Illness Prevention Program rule, which aims to assist employers reduce workplace injuries by increasing their responsibilities for proactively identifying and fixing hazards in their workplaces.

In addition, the President’s budget requests $227 million for OSHA’s federal enforcement activities, an increase of 5.8 percent. The proposal would allocate $21 million for whistleblower protections, which would be separated out from enforcement, a change which OSHA claims would enable it to more easily track and report the resources used in the whistleblower program. According to OSHA, the funding would provide resources for 45 whistleblower investigators and 25 new inspectors.

Additional information concerning the President’s proposed FY2012 budget for the Department of Labor is available on the DOL’s website.

Obama Resubmits Two Labor Nominations to Senate

President Obama resubmitted two nominations to the Senate for labor posts after the Senate failed to act upon the nominations before the close of the 111th Congress. On January 5, Obama resubmitted the nominations of Leon Rodriguez to be Administrator of the Department of Labor’s Wage and Hour Division (WHD) and Thomas M. Beck to be a member of the National Mediation Board (NMB).

Rodriguez was originally nominated to be WHD Administrator on December 3. Currently, Rodriguez serves as Deputy Assistant Attorney General and Chief of Staff in the Civil Rights Division at the Department of Justice.  Rodriguez is Obama’s second nominee for the position of WHD Administrator after his first nominee, Lorlei Boylan, withdrew herself from consideration in October 2009. 

Beck was originally nominated to serve on the NMB in September. He is slated to replace fellow Republican Elizabeth Dougherty, whose term on the NMB ended in June. Dougherty continues to serve pending her replacement. Currently, Beck serves as a member of the Federal Labor Relations Authority (FLRA), to which he was nominated by President Bush in October 2008.

DOL To Refer Workers with FLSA and FMLA Claims to ABA-Approved Private Attorneys

The Department of Labor’s Wage and Hour Division (WHD) has implemented an initiative in conjunction with the ABA to refer workers whose FLSA or FMLA claims the WHD declines to pursue to private attorneys by providing a toll-free number to an ABA attorney approval service. As of December 13, when the WHD informs a complainant that it is declining to pursue his or her claims, it will also provide complainants a toll-free number to contact the ABA-Approved Referral System which will provide the complainant with a list of private attorneys in their geographic area. The referred attorneys will have experience in wage and hour and medical leave claims. The DOL-ABA initiative will also grant an authorized attorney ready access to the information obtained by the DOL in the course of its investigation.

How much information the WHD will provide to a private attorney depends on the stage at which it decides not to pursue the complaint. The WHD may refer the complainant to the ABA service at the complaint intake or complaint review stage if the worker decides not to file a complaint or indicates he or she would prefer to pursue a private right of action.  Referral will also occur if the WHD determines that the complaint does not align with its priorities or that a referral would provide the “quickest access to justice.” At this stage, the worker will be sent a letter stating that WHD did not yet investigate their complaint and providing them the ABA toll-free number.

If, however, the WHD has completed an investigation when it declines to pursue the claim, it will send the complainant a letter with the WHD case number, the violations found, and the amount of wages owed. Complainants will also receive a form that will allow them or an authorized attorney to obtain quickly certain items from the investigation file.

The WHD estimates that 35,000 to 40,000 workers contact the division each year for help, including 25,000 or more workers seeking assistance with minimum wage, overtime, or family medical leave claims. The WHD declines to pursue approximately 10% of these claims, instead informing the complainant that they have a private right of action.

President Obama Announces Nominee for Wage and Hour Division Administrator

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On December 2, 2010, President Obama announced his intention to nominate Leon Rodriguez to the position of Administrator of the Wage and Hour Division (WHD) of the U.S. Department of Labor, a post that has remained vacant during the Obama administration. Currently, Rodriguez serves as Deputy Assistant Attorney General and Chief of Staff in the Civil Rights Division at the Department of Justice, where he oversees the operations of the Division and leads the Division’s work on immigration and national-origin related matters. Rodriguez is Obama’s second nomination for the position of WHD Administrator. Obama’s first nominee, Lorlei Boylan, withdrew herself from consideration in October 2009 after her nomination received opposition, and her confirmation vote was postponed.

Before joining the Civil Rights Division, Rodriguez served as the County Attorney for Montgomery County, Maryland, from 2007 to 2010. Prior to his appointment as County Attorney, he spent several years in private practice at the law firm Ober, Kaler, Grimes & Shriver, where his practice focused on white-collar and health law. From 1997 to 2001, Mr. Rodriguez served first as an Assistant U.S. Attorney in Pittsburgh, Pennsylvania and later as First Assistant U.S. Attorney. From 1994 to 1997, he worked as a trial attorney in the Criminal Section of DOJ’s Civil Rights Division, specializing in prosecuting law enforcement misconduct, racial violence, and human trafficking. Rodriguez began his legal career in 1998 as an Assistant District Attorney in the Kings County District Attorney’s Office in New York.

DOL Expands Interpretation of “Son” or “Daughter” Under the FMLA

The Wage and Hour Division of the U.S. Department of Labor recently issued an Administrator’s Interpretation expanding the definition of “son” or “daughter” under the FMLA. The FMLA entitles an eligible employee to take up to 12 work-weeks of leave for “the birth of a son or daughter,” “the placement of a son or daughter with the employee for adoption or foster care,” or “because of the son or daughter’s serious health condition.” 29 U.S.C. § 2612 (a)(1). The FMLA defines “son or daughter” to include the child of a person standing “in loco parentis.” 29 U.S.C. § 2611(12). In the recent Interpretation, the Administrator expands the definition of “son or daughter” by broadly interpreting who qualifies as acting “in loco parentis.”

The Administrator concluded that an employee acts “in loco parentis” by having day-to-day responsibilities to care for the child or by financially supporting the child.  The FMLA regulation concerning the definition of “son” or “daughter” suggests that standing in loco parentis requires both the responsibilities of care and the financial responsibility. 29 C.F.R. § 825.122(c)(3).  In requiring that only of these two factors be met, the Administrator crafted the Interpretation with an eye toward the non-traditional family, such as, for example, “an employee providing day-to-day care for an unmarried partner’s child” or “an employee who will share equally in the raising of an adopted child with a same sex partner” who lacks a legal relationship to the child.  

The Administrator noted that that while a grandparent who assumes responsibilities for a grandchild while the parents are incapable of providing care would meet the definition, a employee who cares for a child while the child’s parents are away on vacation would not be considered to in loco parentis to that child.  Should an employer question the parental status of an employee, the employee will only be required to give the employer a simple statement of the family relationship as documentation.  

While benefitting the non-traditional family, this new Interpretation might produce incongruous results for the “traditional” family. FMLA regulations limit a husband and wife who work for the same employer to a total of 12 weeks of leave. Since no similar regulations exist for “non-traditional” parents, such parents may have access to twice the amount of leave.

Although the Administrator’s Interpretation purports to limit itself to employees standing “in loco parentis” who seek leave to care for minors, the definition of “son” and “daughter” being interpreted is the general definition for the FMLA statute. Thus, this new Interpretation could apply not only to non-traditional parents caring for minors, but also to other actions encompassed by the FMLA, such as children taking leave to care for their elderly and ailing “in loco parentis” parents.

Wage and Hour Division Changes Interpretation of FLSA Clothes-Changing Provision

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On June 16, 2010, the Wage and Hour Division (WHD) issued an “Administrator’s Interpretation” that reverses prior Bush administration WHD opinion letters interpreting section 3(o) of the Fair Labor Standards Act, 29 U.S.C. § 203(o) and significantly narrows the scope and effect of that provision. This is the second “Administrator’s Interpretation” issued by the WHD since the Department of Labor ended the decades-old practice of issuing definitive fact-specific opinion letters submitted by organizations and individuals. The Administrator’s Interpretations are intended to present a general, “across the board” interpretation of rules and regulations.

Section 3(o) provides that “time spent changing clothes and washing at the beginning or end of each workday” is not compensable if such time is excluded pursuant to “the express terms or by custom or practice” under a collective bargaining agreement. In its new interpretation, WHD concluded that (1) the definition of “clothes” does not include personal protective equipment (or protective clothing), and thus time spent “donning and doffing” such equipment would not be excluded from compensation; and (2) that clothes-changing time excluded from compensation by section 3(o) may nonetheless constitute a principal activity that begins the continuous workday, thus making subsequent activities such as walking and waiting time compensable.

Meaning of Changing Clothes

Pointing to statutory language and legislative history, WHD concluded that section 3(o)’s exemption “does not extend to protective equipment worn by employees that is required by law, by the employer, or due to the nature of the job.” In reaching this conclusion, the interpretation rejected portions of Wage and Hour Opinion Letter 2002-2 (June 6, 2002), and rejected in its entirety its last opinion letter on the subject, Wage and Hour Opinion Letter 2007-10 (May 14, 2007), both issued under the Bush administration. The interpretation instead explicitly endorsed and reaffirmed earlier opinions issued by WHD under the Clinton administration in 1997, 1998, and January 2001 concerning protective equipment worn by meat packing employees, including mesh aprons, plastic belly guards, mesh sleeves, plastic arm guards, wrist wraps, mesh gloves, rubber gloves, polar sleeves, rubber boots, shin guards and weight belts. 

In reaching its conclusion, WHD found persuasive the analysis set forth in Alvarez v. IBP, Inc., 330 F.3d 894, 895 (9th Cir. 2003), aff’d on other grounds, 546 U.S. 21 (2005), and three subsequent district court decisions, all of which involved meat packing employees.  The WHD acknowledged that its current view is inconsistent with recent interpretations of section 3(o) by the Fourth, Fifth, and Eleventh Circuits, but attempted to distinguish those decisions as involving “lighter gear which was, in large part, different from the protective equipment that was the subject of the 1997, 1998, and 2001 opinion letters. 

Start of Continuous Workday

In IBP v. Alvarez, 546 U.S. 21, 37 (2005), the Supreme Court held that activities occurring after the first “principal activity” of the workday and before the last “principal activity” of the workday are part of the “continuous workday” and thus compensable.  Thus, to the extent donning of clothes is found to be a “principal activity” under the Portal to Portal Act, 29 U.S.C. § 254, subsequent activities such as walking to a work station become compensable.  In Wage and Hour Opinion Letter FLSA 2007-10, WHD stated that section 3(o) activities cannot be principal activities that start the continuous workday.  After noting that district courts are divided on the persuasiveness of the opinion letter, “with the majority of district courts rejecting [it],” WHD adopted the view that clothes-changing covered by section 3(o) may be a principal activity that starts the continuous workday. 

The section 3(o) continuous workday issue is currently pending before the Seventh Circuit in Sandifer v. U.S. Steel Corp., No. 10-8001 (petition for interlocutory appeal granted Mar. 25, 2010).  In addition, a similar petition for interlocutory appeal has been filed in the Eleventh Circuit in In re Tyson Foods, Inc. Fair Labor Standards Act Litigation, No. 10- (filed May 10, 2010).

Wage and Hour Division Begins Issuing Administrator Interpretations, Concludes Mortgage Loan Officers Are Not Administrative Employees

On March 24, 2010, the Wage and Hour Division (WHD) of Department of Labor announced that the Administrator will no longer issue definitive fact-specific opinion letters submitted by individuals and organizations. WHD will now issue Administrator Interpretations intended to be “general interpretations of the law and regulations, applicable across-the-board to all those affected by the provision in issue.” In response to requests for opinion letters, WHD will provide “references to statutes, regulations, interpretations and cases that are relevant to the specific request but without an analysis of the specific facts presented.” 

In its first such Interpretation, the Deputy Administrator concluded that issued that mortgage loan officers do not qualify as administrative employees exempt from the provisions of the Fair Labor Standards Act (FLSA). The Interpretation states that the “primary duty” of mortgage loan officers is sales and therefore, “mortgage loan officers perform the production work of their employer,” namely, selling financial products akin to loan officers, who are consistently described as outside sales people. This Interpretation does not address whether the sales duties of any particular loan officer fall within the outside sales exemption or are limited to inside sales.

The Interpretation also withdrew Wage and Hour Opinion Letter FLSA 2006-31 (Sept 8, 2006) and other with the same analysis. The 2006 opinion letter misinterpreted 29 C.F.R. §541.203(b) by assuming that an alternative standard for the administrative exemption applied to the financial services industry. The regulation is intended only to provide an example distinguishing financial sector employees whose primary duties are related to management or general operations with those who sell financial products.

Obama Withdraws Nomination of Lorelei Boylan as Wage and Hour Division Administrator

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On October 13, 2009, President Barack Obama withdrew the nomination of Lorelei Boylan as Administrator of the Department of Labor’s Wage and Hour Division. The Wage and Hour Administrator is responsible for enforcing the Department of Labor’s wage and hour laws, as well as issuing interpretative guidance and opinion letters to assist employers in their efforts to comply with those laws.  

The White House first announced its intent to nominate Boylan as the Wage and Hour Administrator on April 14, 2009.

Wage and Hour Division Releases Memorandum Concerning the Applicability of Davis-Bacon Labor Standards to Projects Funded by the Economic Stimulus Bill

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On May 29, 2009, the Wage and Hour Division (WHD) released a memorandum to all federal agencies and the District of Columbia regarding federal and federally-assisted construction work funded in whole or in part by the American Recovery and Reinvestment Act (ARRA). Currently, the Davis-Bacon Act requires that each contract over $2,000 for the construction, alteration, or repair of public buildings or public works to which the United States or the District of Columbia is a party must include a provision stating the minimum wages laborers and mechanics are paid. The Secretary of Labor determines the prevailing wages for the corresponding classes of laborers and mechanics employed on projects.

Section 1606 of the ARRA indicates that the Davis-Bacon prevailing wage requirement broadly applies to ARRA-funded construction projects. Projects receiving such funding must follow the requirements located in the DOL regulations at 29 C.F.R. Parts 1, 3 and 5. This provision explicitly overrides any limitation to Davis-Bacon coverage contained in other Davis-Bacon related Acts. Thus, even if a construction project receives funding from multiple statutes, the ARRA prevailing wage requirement governs if the project receives ARRA funding. 

Section 1606 of the ARRA does not apply to the following contracts: (1) tribal contracts with the Bureau of Indian Affairs involving repair and restoration of roads, school improvements, repairs and replacement construction, and detention center maintenance; (2) tribal contracts with the Department of Health and Human Services, Indian Health Services involving Indian health facilities construction projects; and (3) contracts receiving project-based rental assistance funding from the Department of Housing and Urban Development.

The WHD provides additional information for construction projects receiving ARRA funding on its website.