On July 28, 2008, the Department of Labor’s Wage and Hour Division (”WHD”) posted seven opinion letters offering guidance on the proper application of the Fair Labor Standards Act (”FLSA”). The opinion letters regarding missed meal breaks, on-call time, and required shoes are discussed in detail below. 

Missed Meal Breaks, Premium Pay Offset, Unrecorded Work and Rounding.  In Letter FLSA2008-7NA, the WHD addressed a series of issues concerning employer liability when an employee misses a scheduled meal break. 

First, if an employee fails to take a meal break and does not notify the manager that he did so in direct violation of company policy, then the employer is still responsible for compensating the employee for all hours worked including the time during the missed meal period. “Work not requested but suffered or permitted is work time.” 29 C.F.R. § 785.11. The employer is not required to pay overtime, however, unless the employee worked more than 40 hours in the workweek.  No straight-time compensation is due under the FLSA if the employee works less than 40 hours in the week as long as the amount of pay divided by the number of hours worked exceeds the minimum wage.

Second, the “missed meal” period is considered work time for purposes of determining overtime compensation. The employee must be paid for all hours worked at the agreed rate plus the overtime premium for all hours worked over 40 in a workweek. If the employee works more than 40 hours, the employee must also be paid all straight time wages due under any express or implied contract or applicable statute.

Third, if an employee is regularly scheduled to work 35 hours per week and begins work early or works after the regular finishing time, the additional straight work time must be compensated if the total number of hours exceeds 40 in the workweek.

Fourth, an employer’s written policy against working outside of the schedule would not, ipso facto, insulate an employer from having to pay the employee.  Rather, the effect of a written policy on an employer’s responsibilities is a fact-specific inquiry. See e.g., Chao v. Gotham Registry, Inc., 514 F.3d 280 (2d Cir. 2008). In general, “it is the duty of the management to exercise its control and see that the work is not performed if it does not want it to be performed. It cannot sit back and accept the benefits without compensating for them. The mere promulgation of a rule against such work is not enough.” 29 C.F.R. § 785.13.

Fifth, under sections 7(e)(5), (6), and (7) of the FLSA, certain premium payments made by employers for work in excess of specified daily or weekly standard work periods or on certain special days are regarded as overtime premiums. In such situations, the extra compensation provided by the premium rates need not be included in the employee’s regular rate of pay for the purpose of computing overtime compensation.

Sixth, under 29 C.F.R. § 785.48(b), an employer can round off an employee’s time to the nearest five minutes, or the nearest one tenth or quarter of an hour. This type of rounding is acceptable as long as it would not result, over a period of time, in a failure to compensate the employees properly for all the time they have actually worked. See Field Operation Handbook § 30a02(b).

Required Type of Shoes are Not Uniforms.  In Letter FLSA2008-4, the WHD Administrator addressed an issue concerning §3(m) of the FLSA. An employer who required employees to wear “dark-colored,” closed-toed shoes with a non-slippery bottom requested guidance on whether the shoe requirement constituted a “uniform.”

The Administrator explained that although there are no “hard-and-fast rules” in determining whether certain types of dress are considered uniforms for the purposes of compliance with the provisions of the FLSA, the WHD’s Field Office Handbook § 30c12(f) provides the following applicable principles: (1) “if an employer merely prescribes a general type of ordinary basic street clothing to be worn while working and permits variations in details of dress, the garments chosen by the employees would not be considered to be uniforms,” and (2) “where the employer does prescribe a specific type and style of clothing to be worn at work, e.g. where a restaurant or hotel requires a tuxedo or a skirt and blouse or jacket of a specific or distinctive style, color, or quality, such clothing would be considered uniforms.” Applying these principles, the Administrator found that the shoe requirement did not constitute a uniform and thus the employer was not responsible for the costs. 

The Administrator also addressed the issue of whether the employer may offer to advance the money necessary for employees to voluntarily purchase shoes from a shoe manufacturer and recoup the advance through payroll deductions where those deductions may cause the employee’s paycheck to fall below the minimum wage for each hour worked in the pay period. Section 3(m) includes as part of “wages” the “reasonable cost” to the employer for furnishing any employee with board, lodging or other facilities. The Administrator held that allowing employees to purchase shoes and then deducting the cost of the shoes from their wages is an allowable deduction because the shoes constitute “other facilities.” See Field Office Handbook § 30c03(a)(4) (”Goods and merchandise, such as clothing and appliances, may be considered ‘other facilities’ . . . Only the actual cost to the employer (not necessarily the retail cost) may be taken as a wage credit.”). The Administrator also determined that the same deductions were allowable for “tipped” employees.

On-call Time and Hours Worked.  In Letter FLSA2008-8NA, the WHD addressed an issue regarding compensability of on-call time was compensable. The employer, an ambulance rescue service, requested guidance on whether the on-call time spent by rescue employees is considered hours worked. Employees report to the squad house from 8:00 a.m. to 4:00 p.m. and are on call from 6:00 a.m. to 8:00 a.m. and from 4:00 p.m. to 6:00 p.m. five days a week without compensation. The employee has eight minutes to drive to the squad house if that employee receives an emergency call during the on-call period. The employee is paid one and one half times his or her hourly rate for the time spent on the emergency call. The number of calls to which the employee must respond varies. In the winter, the calls may occur every day. During the rest of the year, the employee may be called once or twice a week or, in some weeks, not at all.

Under 29 C.F.R. § 785.17, “[a]n employee who is required to remain on the employer’s premises or so close thereto that he cannot use the time effectively for his own purposes is working while ‘on call.’” On the other hand, “[a]n employee who is not required to remain on the employer’s premises but is merely required to leave word at his home or with company officials where he may be reached is not working while on call.” Id.; see also 29 C.F.R. § 553.221(d).

The WHD found that the winter on-call time was compensable but that the summer on-call time was non-compensable. The time spent waiting on call during the winter season was sufficiently restrictive to make it compensable under the FLSA because: (1) the extremely short in-person response time precludes the effective use of the on-call time for all but the narrowest range of personal purposes (2) all of the on-call time must take place within a restricted geographic area to allow for such a rapid response, (3) the high number of call-ins (requiring one response every four hours), (4) the apparent impossibility of trading on-call responsibilities because both employees are on call five days per week, and (5) the inability to turn down any of the call-ins. The WHD also cautioned that if the frequency of calls in the non-winter months were to increase, the employees’ ability to use the on-call time effectively for their own purposes would need to be reevaluated. Similarly if the frequency of calls in winter months were to decrease to fewer than, on average, one call per four-hour shift, the conclusion that the employees are unable to use the on-call time for their own purposes would need to be reevaluated.

The other four WHD opinion letters concerned use of three-week pay periods, sale of novelty items at promotional events, status of “jailers” as “law enforcement personnel,” and application of the learned professional exemption to “service coordinators.”

On July 15, 2008, the House Education and Labor Committee held a hearing titled “Is the Department of Labor Effectively Enforcing Our Wage and Hour Laws?” Most of the testimony heard by the committee concerned the capacity of the Wage and Hour Division (WHD) to enforce the Fair Labor Standards Act (FLSA). Critics contend that the Bush administration has failed to protect workers against a growing problem of “wage theft” by adopting weak approaches to enforcement and reducing funding and staffing levels of the WHD.

In his opening remarks, Chairman George Miller (D-CA) chided employers for paying employees less than minimum wage, refusing to pay overtime when employees worked more than forty hours, and requiring employees to work off the clock. At Chairman Miller’s behest, the Government Accountability Office (GAO) launched two separate investigations into wage theft.

Gregory D. Kutz, Managing Director of Forensic Audits and Special Investigations for the GAO, discussed case studies that revealed examples of WHD not adequately pursuing labor violations. In particular, these studies included instances where WHD inadequately investigated complaints from low-wage workers alleging that employers had failed to pay them the federal minimum wage and required overtime pay, and had withheld their last paychecks. WHD investigators provided the following explanations for their limited responses to some of these complaints: they had to compete against the statute of limitations for assessing back wages because of a backlog of complaints; they did not thoroughly investigate complaints filed anonymously; they did not fully investigate complaints about isolated issues; and they did not treat complaints about receipt of last paychecks as cases to be investigated.

Alexander Passantino, the Acting Administrator for the WHD, outlined WHD’s enforcement responsibilities. He identified a variety of tools that WHD employees use to enforce the law and to achieve compliance, including responding to complaints, initiating directed cases, engaging in educational and other outreach activities, and assessing penalties against violators. Despite achieving improved FLSA compliance in the garment, long-term health care, and poultry processing industries, Passantino noted that WHD’s steadily declining staff level frustrated its performance efforts.

Anne-Marie Lasowski, Acting Director of Education, Workforce and Income Security Issues for the GAO, testified that WHD could improve compliance by making better use of available resources and ensuring consistent reporting. She attributed WHD’s inefficiency to (1) the increased use of more time-consuming comprehensive investigations; (2) a decrease in the number of investigators; and (3) the screening of complaints to eliminate those that may result in violations. The extent to which WHD’s activities have improved FLSA compliance is uncertain because the agency frequently changes how it measures and reports its performance. To assist WHD with better planning and conducting its FLSA compliance activities, GAO recommended that it evaluate complaint data, obtain and use input from external stakeholders, incorporate data from its commissioned studies, and leverage existing tools.

Kim Bobo, Executive Director of Interfaith Worker Justice, also provided recommendations for how WHD could better enforce compliance with FLSA. She suggested that it: (1) develop a community policing model for wage enforcement; (2) devote 50 percent of the Wage and Hour Division’s staff and resources to targeted investigations; (3) punish those who steal wages in meaningful ways; (4) experiment with new educational and enforcement approaches; and (5) increase the number of enforcement staff and attorneys devoted to wage and hour compliance. Additionally, Ms. Bobo recommended that WHD assign at least half the total investigators to targeted investigations focused on low-wage industries known to steal wages from workers.

On April 21, 2008, the Department of Labor’s Wage and Hour Division (”WHD”) issued a new opinion letter on the administrative exception to the minimum wage and overtime requirements of the Fair Labor Standards Act (”FLSA”). 

In the letter, the WHD found that a Product Technology Application and Marketing Analyst (”PTA”) was an exempt employee under the FLSA.  The PTA’s primary responsibility was to work independently with the company’s engineering team to measure the performance of new products.  The PTA spent approximately 30 percent of her time as a liaison to the company’s sales team, and was the sale representatives’ primary point of contact for technical advice. The remainder of the PTA’s time was spent performing standardized tests on the company’s products, and writing reports summarizing the results and making comparisons to competitors’ products.  

An employee is exempt from the FLSA’s overtime requirements only if: (1)  the employee is compensated on a salary or fee basis at a rate of not less than $455 per week, (2)  the employee’s primary duty consists of the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and (3) the primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.  29 C.F.R. § 541.200(a). 

The WHD concluded that the PTA met the requirements of this test because (1) the PTA met the salary requirement; (2) “work directly related to the management or general business operations” includes the work that the PTA performed in such functional areas as quality control, research, and marketing; and (3) the PTA exercised “discretion and independent judgment” when the PTA carried out major testing assignments and made decisions about how the employer’s products compared against competitors’ products.

The Wage and Hour Division (WHD) recently released and posted its first opinion letters since May 2007. The first two opinion letters construed the executive and professional overtime exemptions and the third opinion letter clarified how volunteers can receive limited compensation.In its August 23, 2007 letter, the WHD determined that court reporters are not exempt from overtime under the Fair Labor Standards Act (FLSA). See DOL, Wage & Hour Div., Op. Letter 2007-2NA (Aug. 23, 2007). Court reporters do not qualify for the executive exemption because they do not supervise two or more full-time employees and they do not qualify for the professional exemption because their work does not require advanced knowledge “customarily acquired by a prolonged course of specialized intellectual instruction.” The WHD explained that “[w]ork that can be performed by employees with education and training that is less than a required bachelor’s degree in a particular discipline generally does not qualify as learned professional work under the regulations.”

In its September 17, 2007 letter, the WHD further refined the executive exemption by finding that field inspectors for a membership-based cattle producers association were exempt executives. See DOL, Wage & Hour Div., Op. Letter 2007-11 (Sept. 17, 2007). The association had requested guidance on whether its field inspectors, who oversee subordinate market inspectors, were non-exempt under 29 C.F.R. § 541.3(b)(1), which states that the overtime exemptions “do not apply to … inspectors … who perform work such as … conducting investigations or inspections for violations of law; performing surveillance; pursuing, restraining and apprehending suspects; … preparing investigative reports; or other similar work.” The WHD stated that the field inspectors in question “differ from the inspectors described in § 541.3(b)(2), because the Field Inspectors’ primary duty is management of a customarily recognized department, not duties related to investigations.” The WHD emphasized the importance of the inspectors’ primary duty in making the determination.

Finally, on September 17, the WHD clarified what kind of compensation volunteer firefighters could receive under the FLSA. See DOL, Wage & Hour Div., Op. Letter 2007-3NA (Sept. 17, 2007). The WHD found several kinds of compensation valid, including: (1) tuition to pay for the Fire Academy and Fire School; and (2) life insurance, a disability policy, and a monthly contribution of $100 to the state-created retirement fund. However, the WHD opined that a $550 stipend for income lost from regular employment is probably invalid because “the purpose of this payment is specifically to compensate the firefighters for their lost days of paid work.” Additionally, the WHD expressed doubt as to whether a $19.72 per call stipend, ostensibly paid to cover volunteers’ incidental costs, constitutes a “nominal payment” under the regulations. Under the WHD’s 20 percent rule, “the Department will presume the fee paid is nominal as long as it does not exceed 20 percent of what the public agency would otherwise pay to hire a full-time … advisor for the same services.” However, the WHD could not apply the 20 percent rule to the firefighters because it did not have sufficient knowledge of what paid-firefighters received.