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.

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).

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.

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.

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.

On May 5, 2009, the Department of Labor’s Wage and Hour Division (WHD) posted a new opinion letter on the scope of permissible employer policies requiring employees to provide notice of FMLA leave, which the WHD designated as FMLA2009-1-A.

Signed by Acting Administrator Alexander Passantino, the new letter expressly supersedes a January 15, 1999 opinion letter (designated as FMLA-101). The prior opinion letter had been interpreted to prohibit employers from applying internal call-in policies, disciplining employees under no call/no show policies, or disciplining employees who call in late, as long as the employees provided notice within two business days that the leave was FMLA-qualifying, regardless of whether they could have practicably provided notice sooner.

When the DOL published on February 11, 2008, a Notice of Proposed Rulemaking (NPRM) on proposed changes to the 1995 FMLA regulations, it clarified that regulatory language requiring employees who cannot provide the required 30 days advance notice to provide notice of the need for FMLA leave “as soon as practicable . . . ordinarily . . . within one or two business days of when the need for leave becomes known to the employee” was intended as an illustrative outer limit only. The DOL asserted that FMLA-101’s so-called “two day rule” for FMLA notice “in effect, mistakenly read the regulation as allowing employees two business days from learning of their need for leave to provide notice to their employers, regardless of whether it would have been practicable to provide notice more quickly” (emphasis added). The revised regulation, which became effective on January 16, 2009, clarifies that where an employee cannot provide 30 days advance notice of FMLA leave, “it should be practicable for the employee to provide notice of the need for leave either the same day or the next business day” after becoming aware of the need for leave, but that “the determination of when an employee could practicably provide notice must take into account the individual facts and circumstances.” 29 C.F.R. § 825.302(b).

The new WHD opinion letter notes that “where an employer’s usual and customary notice and procedural requirements for requesting leave are consistent with what is practicable given the particular circumstances of the employee’s need for leave, the employer’s notice requirements can be enforced.” Thus, the determination of the adequacy of an employee’s notice is driven by the individual facts and circumstances, rather than an arbitrary two-day timeframe. The regulation itself also recognizes employers’ ability to enforce reasonable call-in policies. “Where an employee does not comply with the employer’s usual notice and procedural requirements, and no unusual circumstances justify the failure to comply, FMLA-protected leave may be delayed or denied” so long as the employer does not delay or deny leave where the employee provides timely notice as set by the regulation.  29 C.F.R. § 825.302(d).

Therefore, to the degree that WHD Opinion Letter FMLA-101 had been interpreted to create a flat “two day rule,” the Department’s new letter officially rescinds it.

On April 14, 2009, President Barack Obama announced he intends to nominate Lorelei Boylan as the Administrator for the Department of Labor’s Wage and Hour Division. The Wage and Hour Administrator is responsible for enforcing the agency’s wage and hour laws as well as issuing interpretative guidance and opinion letters to assist employers in their compliance efforts with these laws.

Boylan currently serves as the Director of Strategic Enforcement at the New York State Department of Labor, Labor Standards Division, where she supervised a statewide task force responsible for investigating low-wage industries. Prior to this role, Boylan was the head of the Bureau of Immigrant Workers’ Rights and served as an Assistant Attorney General in the New York State Attorney General’s Office.

The White House has not yet indicated when President Obama’s final nomination will be announced.

On March 26, 2009, the U.S. Department of Labor’s Employment and Training Administration (ETA) published notice in the Federal Register announcing that it has withdrawn for further consideration an interpretation of the Fair Labor Standards Act (FLSA) published in the final regulations revising H-2A and H-2B visa requirements. The H-2A and H-2B visa programs allow U.S. agricultural businesses to employ foreign workers in temporary or seasonal agricultural jobs. The final rules revising the procedures for issuance of H-2A and H-2B nonimmigrant visas were published in the Federal Register on December 18 and December 19, 2008, respectively. The preambles to both final rules included a discussion on the treatment of reimbursable expenses incurred under the H-2A and H-2B visa programs and rejected an Eleventh Circuit decision regarding such reimbursements.

In Arriaga v. Florida Pacific Farms, L.L.C., the U.S. Court of Appeals for the Eleventh Circuit held that the transportation and visa costs of temporary nonimmigrant workers coming to the U.S. under the H-2A visa program were primarily for the employer’s benefit and therefore reimbursable under the FLSA. 305 F.3d 1228 (11th Cir. 2002). A number of district courts, following the Arriaga decision, reached the same holding. The discussion in the H-2A and H-2B final rules concluded that the Arriaga decision and the related district court decisions were wrongly decided and that inbound travel expenses of H-2A and H-2B workers were not primarily for the benefit of the employer. Accordingly, DOL concluded that the inbound travel expenses were not reimbursable under FLSA, regardless of whether such costs result in workers being paid less than minimum wage. DOL did not seek public comment on this discussion and characterized it as an interpretation of the FLSA.

Because of the reach of FLSA coverage, this interpretation may have ramifications beyond the H-2A and H-2B programs and result in various pre-employment expenses lawfully reducing workers’ weekly wages below minimum wage. For this reason, ETA has withdrawn this interpretation for further consideration and announced that it may not be relied upon as a statement of DOL policy, until further interpretive guidance is disseminated by the agency.

On March 6, 2009, the Department of Labor’s Wage and Hour Division (WHD) posted forty new opinion letters discussing a variety of wage and hour issues. The WHD immediately withdrew 20 of the letters for further consideration. The WHD, charged with administering the Fair Labor Standards Act (FLSA), periodically issues opinion letters in response to questions submitted by employers. This article discusses opinion letters on (1) retroactive payment of overtime, (2) compressed two-week work schedules, (3) deductions for voluntary and mandatory time off, and (4) deductions from paid time-off plans.

In this opinion letter, the employer asked about the proper method to calculate retroactive payment of overtime wages for employees previously considered exempt from overtime wages. The employer paid the employees through the fluctuating workweek method, which allows employers to pay a fixed salary “for the hours worked each workweek, whatever their number, rather than for working 40 hours or some other fixed weekly work period.” 29 C.F.R. § 778.114(a). The WHD allows this method of payment if the salary compensates the employee for all straight time hours worked at a rate not less than the minimum wage and for all overtime hours worked at an additional one-half of the regular rate. Id. For example, the employer expected the employees to work at least 50 hours per week and paid a bi-weekly salary of $1,825.50. The employer converted this compensation to an hourly rate of $18.25 by dividing the bi-weekly salary, $1,825.50, by the expected hours worked in the pay period, 100.

The employer realized that it had misclassified its employees as exempt. Thus, the employer needed pay back wages to the employees for overtime hours worked during the period of misclassification. The employer took the following steps: (1) divided the weekly equivalent of the employee’s bi-weekly salary by the number of hours the employee worked that week to determine the regular rate; (2) multiplied the regular rate by one-half to determine the overtime rate; and (3) multiplied the overtime rate by the number of overtime hours worked in that workweek. The WHD concluded that the employer performed the correct method to calculate any back wages it may owe to the employees.

Compressed Two-Week Work Schedules

In this opinion letter, the employer asked whether a proposed workweek arrangement complied with the FLSA. Currently, the employer allows employees to work nine days during the pay period. The employees work nine hours per day Monday through Thursday and eight hours on every other Friday. The employer plans to change its time-keeping system to require employees to choose their workweek schedule. One schedule starts at 11:31 a.m. Friday and ends at 11:30 a.m. the following Friday, with the scheduled workday starting at 7:30 a.m. The other schedule begins at 12:31 p.m. Friday and ends at 12:30 p.m. the following Friday, with the scheduled workday starting at 8:30 a.m. The employer will pay time and one-half for all hours worked over forty in any workweek.

The WHD stated that a workweek does not need to correspond to a calendar week. Instead, “[a]n employee’s workweek is a fixed and regularly recurring period of 168 hours - seven consecutive 24-hour periods.” 29 C.F.R. § 778.105. The WHD concluded that the employer’s proposed schedules complied with the FLSA because they are fixed 168-hour periods and pay employees for any hours worked over forty in a workweek.

Deductions for Voluntary and Mandatory Time Off

In this opinion letter, the employer proposed to reduce the hours worked by exempt employees due to short-term business needs. The employer would offer voluntary time off (VTO), which allows the employees to continue accruing employment benefits, on a first-come, first served basis. If the employer does not receive a sufficient number of volunteers, it will require mandatory time off (MTO) under a seniority-based method. An employee will be entitled to use accrued paid leave or take unpaid MTO. If, however, the employee chooses not to use any accrued paid leave or does not have enough accrued paid leave, the employer plans to deduct the amount equal to the VTO or MTO from the employee’s salary. If the unpaid VTO or MTO lasts an entire workweek, the employer does not pay the salary for the workweek.

The WHD concluded that the salary deductions proposed by the employer do not comply the salary basis requirement in 29 C.F.R. § 541.602(a). That provision states that “[i]f the employee is ready, willing and able to work, deductions may not be made for time when work is not available.” 29 C.F.R. § 541.602(a). While the WHD allows salary reductions that reflect a reduction in the normal scheduled workweek if the reductions are not designed to circumvent the salary basis requirement, the WHD determined that the employer’s deductions in this situation are the type that the salary basis requirement intends to preclude. For an employer to deduct an employer’s salary for taking VTO, the employee’s decision to take VTO must be completely voluntary and not “occasioned by the employer or by the operating requirements of the business.” 29 C.F.R. § 541.602(a).

In this opinion letter, the employer proposed to require exempt employees to stay home or leave work early during periods of insufficient work. The employer would deduct the non-work time from the employees’ accrued paid time-off (PTO) accounts. If an employee’s accrued PTO account is exhausted, the employee’s salary will be reduced in full-day increments until it reaches the minimum salary required for the section 13(a)(1) exemption status, $455 per week.

The WHD stated that an employee is not paid “on a salary basis” if any deductions from the employee’s salary is made for full or partial day absences because of a lack of work. 29 C.F.R. § 541.602(a). Even if the absence is directed by the employer or results from a lack of work, an employer can substitute or reduce the employee’s accrued leave if the employee still received an amount equal to the employee’s guaranteed salary.

If an employer requires an exempt employee to work less than a full workweek, the employer must pay the employee’s full salary even if: (1) the employer does not have a bona-fide benefits plan; (2) the employee has no accrued benefits in the leave bank; (3) the employee has limited accrued leave benefits, and reducing that accrued leave will result in a negative balance; and (4) the employee already has a negative balance in the accrued leave bank. The WHD referred the employer to previous opinion letters dated October 24, 2005; May 27, 1999; February 18, 1999; May 23, 1996; and April 6, 1995.

The employer also asked whether it could schedule the exempt employee for less than forty hours and reduce the employee’s pay if the employee’s accrued PTO is exhausted. The employer would require the employee to be away from work one day a week and only pay the employee for four days.

The WHD concluded that this practice would violate the salary basis requirement in 29 C.F.R. § 541.602(a) because the employee would not be paid on a fixed and guaranteed weekly salary basis without regard to the quantity of work performed. The WHD also concluded that a WHD opinion letter dated November 13, 1970, which the employer relied upon for support, is distinguishable from the employer’s proposal. In the 1970 letter, the employer proposed a permanent change from 52 five-day workweeks to 47 five-day workweeks and 5 four-day workweeks. The WHD found that the 1970 proposal did not circumvent the salary basis requirement because that employer paid the employees a bona fide reduction of one-fifth their salaries for a fixed schedule of five annually recurring four-day workweeks. In contrast, the WHD found that the plan proposed here was not part of a fixed schedule; instead, it made salary deductions based on day-to-day or week-to-week determinations of the operating requirements of the business. Because such determinations are inconsistent with the salary basis requirement, the WHD concluded that the employer’s proposed plan violated 29 C.F.R. § 541.602(a).

On January 8, 2008, the Department of Labor’s Wage and Hour Division (WHD) posted eleven new opinion letters discussing a variety of wage and hour issues. The WHD, charged with administering the Fair Labor Standards Act (FLSA), periodically issues opinion letters in response to questions submitted by employers. This article discusses opinion letters on (1) eligibility to participate in tipping pools, and (2) an employer’s duty to provide uniforms to a tipped employee who repeatedly damages the uniform while off-duty.

Tip Pools

In the first opinion letter, the WHD found that sushi chefs who cook and serve food to customers can participate in a tipping pool. The employer asked about two kinds of chefs: itamae-sushi chefs and teppanyaki chefs. Itamae-sushi chefs prepare and serve sushi to customers in the bar area. Teppanyaki chefs, on the other hand, prepare meals at a table located at customer tables and serve meals to customers. Servers assist both kinds of chefs by taking orders for meals and drinks, and bussers remove plates and serve water. The sushi chefs participated in a tip pool with servers, bussers, bartenders, and counter persons. All members of the tip pool made at least $30 per month in tips.

A tipped employee is “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.” 29 U.S.C. § 203(t).  Employees who “customarily and regularly receive tips” are eligible to participate in a tip pool. See 29 U.S.C. § 203(m). The WHD concluded that the sushi chefs could participate in a tip pool because the sushi chef position was not unlike the position of a counter person, and “[i]t has been [the WHD’s] longstanding position that counter persons who serve customers may participate in tip pools.” The WHD cited to a previous January 25, 1983 opinion letter finding that a waiter chef who brings food orders from the kitchen and cooks it on a hibachi grill in front of customers could participate in a tip pool.

Uniforms

In the second opinion letter, the WHD found that that if an employer supplies a “reasonable and sufficient number” of uniforms and replaces any uniforms that are damaged in the course of work-related duties, the employer has satisfied its obligations under the FLSA. The employer had routinely provided tipped employees with a sufficient number of uniforms made of regular wash-and-wear materials. The uniforms were routinely washed and dried with other personal garments by the employees, and did not require special laundering. The employer provides replacement uniforms at no charge. One employee, however, had damaged multiple uniforms while riding a skateboard on his days off. The employer asked if it could require the employee to pay for his own uniform. 

An employer must be able to show that tipped employees receive at least the applicable minimum wage when wages and tips are combined. See 29 U.S.C. § 203(m). Under 29 C.F.R. § 531.35, “[w]hether in cash or in facilities, ‘wages’ cannot be considered to have been paid by the employer and received by the employee unless they are paid finally and unconditionally or ‘free and clear.’  The wage requirements of the Act will not be met where the employee ‘kicks-back’ directly or indirectly to the employer . . . part of the wage delivered to the employee.” The FLSA further requires that expenses that are “primarily for the benefit of the employer” cannot be counted as wages and thus must be paid by the employer (or reimbursed) if failure to do so would bring the employee’s wages below minimum wage in any week. See 29 U.S.C. § 206(a)(1); 29 U.S.C. § 203(m); 29 C.F.R. § 531.3(d). Uniforms required by the employer to be worn while on duty are considered to be for the benefit or convenience of the employer. Employees may not be required to pay for such items if, by so doing, their wages would be reduced below the required minimum wage or overtime compensation. This is true even if an economic loss suffered by the employer is due to the employee’s work-related negligence. Employers may not avoid FLSA minimum wage and overtime pay requirements by having the employee reimburse the employer in cash for the cost of such items because the effect is the same as deducting the cost from the employee’s wages. See 29 C.F.R. §§ 531.3(d), 531.32(c), 531.35.

The WHD found that the employer did not have to continue to provide uniforms to the employee who damaged the uniform on non-work days: “[a]n employer’s obligations under the FLSA are not unlimited . . . [i]f an employer supplies a reasonable and sufficient number of wash and wear uniforms and replaces any uniforms that are damaged in the course of work-related duties, the employer has satisfied its duty to pay expenses that are primarily for the benefit of the employer.” The WHD analogized this situation to a scenario where an employee was using clothes for personal use, and found that the FLSA was inapplicable to that scenario: “[t]he FLSA does not compel the employer to supply its employees with clothing for personal use.”