On July 28, 2008, the Department of Labor (”DOL”) announced a Notice of Proposed Rulemaking to revise existing regulations under the Fair Labor Standards Act (”FLSA”). Billed as “clean-up” amendments, the new rules are an attempt to bring the regulatory regime into accord with new judicial and legislative developments. The proposed rules are the culmination of a decade-long initiative begun in 1996.
The proposed rulemaking would change the existing FLSA regulations in a number of ways:
Tips credits. The FLSA allows employers to use the money an employee receives in tips to count towards that employee’s total compensation for minimum wage purposes. The proposed rules would incorporate 1974 and 1977 amendments to the FLSA’s tip credit provisions. Specifically, the proposed regulations specify that an employer could not take a tip credit unless “(1) [its] employee has been informed by the employer of the provisions of this subsection and (2) all tips received by such employee have been retained by the employee, except that this subsection shall not be construed to prohibit the pooling of tips among employees who customarily and regularly receive tips.” The proposed regulations would also allow an employer to claim credit against wages for the reasonable cost of providing employees with meals and may require their acceptance as a mandatory condition of employment.
Compensatory Time. In 1985, Congress changed the FLSA to allow public sector employees to receive compensatory time instead of overtime payments. Compensatory time can be used as leave; a typical compensatory time arrangement allows an employee to take every other Friday off if that employ accrues nine hours of overtime every two weeks. The proposed regulations would incorporate several Courts of Appeal decisions interpreting compensatory time. Specifically, the regulations outline an employer’s duty to grant an employee compensatory time off “within a reasonable period after [the employee] mak[es] the request” if the use of compensatory time does not unduly disrupt the agency’s operations.
Commute Time. The proposed regulations define certain circumstances when pay is not required for employees who use vehicles provided by their employers for home-to-work commuting purposes. Specifically, travel time is to be considered noncompensable if the use of the vehicle is ‘‘conducted under an agreement between the employer and the employee or the employee’s representative.” The agreement may be a formal written agreement, a collective bargaining agreement, or an understanding based on established industry or company practices.
Youth Opportunity Wage. The proposed regulations would also incorporate a youth opportunity wage that allows an employer to pay an employee under 20 years of age a minimum wage of $4.25 per hour during the employee’s first 90 consecutive calendar days of initial employment with the employer. The amendment also protects current workers by prohibiting employers from taking action to displace employees, including reducing hours, wages, or employment benefits, for the purpose of hiring workers at the opportunity wage.
Salesmen Exemption. The proposed regulations would incorporate developments in the salesmen exemption to the FLSA. Generally, salesmen are exempt from the FLSA’s overtime requirements. The proposed regulations would incorporate a 1974 Congressional amendment to extend the overtime exemption to include any salesman primarily engaged in selling boats and eliminated the overtime exemption previously provided for partsmen and mechanics servicing trailers or aircraft. The proposed regulations would also change the language to include “any salesman, partsman, or mechanic primarily engaged in selling and servicing automobiles.”
Minimum Tipped Wage. The proposed regulations would establish the minimum cash wage required to be paid to tipped employees at $2.13 per hour and would limit the allowable hourly tip credit to the difference between $2.13 and the applicable minimum wage required by section 6(a)(1) of the FLSA.
Agricultural Workers on Water Storage/Irrigation Projects. The proposed regulations would expand an existing FLSA overtime pay exemption for workers on ditches, canals and reservoirs to cover employees who spend 90 percent (rather than 100 percent) of the water is used for agricultural purposes.
Food Bank Workers. The proposed regulations would incorporate a 1998 amendment to the definition of “employee” that excludes individuals who volunteer solely for humanitarian purposes to private non-profit food banks and who receive groceries from those food banks.
Firefighters. The proposed regulations would add a new definition for employees engaged in “fire protection activities.” The new definition would include “a firefighter, paramedic, emergency medical technician, rescue worker, ambulance personnel, or hazardous material worker, who-(1) is trained in fire suppression, has the legal authority and responsibility to engage in fire suppression, and is employed by a fire department of a municipality, county, fire district, or State; and (2) is engaged in the prevention, control, and extinguishment of fires or response to emergency situations where life, property, or the environment is at risk.”
Stock Options Not Part of Regular Rate. The proposed regulations would specify that stock options meeting certain criteria were an additional type of remuneration that could be excluded from the regular rate when computing overtime pay.
Higher Minimum Wage. The proposed regulations would reflect the current tiered increase minimum wage: $5.85 per hour effective July 24, 2007; $6.55 per hour effective July 24, 2008; and $7.25 per hour effective July 24, 2009.
Fluctuating Workweek. The proposed regulations clarify the regulations governing the “fluctuating workweek” method of computing overtime pay for salaried nonexempt employees whose weekly work hours vary or fluctuate, and who receive a fixed salary as compensation (apart from overtime premiums) for whatever hours they are called upon to work in a workweek, whether few or many. The proposed clarifying revision would eliminate language that discourages employers from paying bonuses or premium payments in addition to salary (e.g., nightshift differentials or hazard pay) by sometimes invalidating the fluctuating workweek method of overtime computation where such payments are made.
The DOL will be accepting comments on the proposed regulations until September 11, 2008.