The U.S. Department of Labor recently issued three new opinion letters on overtime pay under the Fair Labor Standards Act. Opinion letters cover specific fact situations presented by employers, workers or other parties and are only legally binding on the party who requested the letter. However, employers may be able to claim safe harbor if they rely on an official opinion letter.
Rounding out hours worked
The first letter covers rounding an employee's hours up or down based on traditional rounding practices. In this case, an employer's time clock measured employees' working hours to six decimal points, but its payroll software rounded those hours to two decimal points.
The DOL says that rounding is acceptable as long as it "will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked."
This employer's rounding was neutral on its face and would likely average out over time so that employees were ultimately paid for all their hours. The DOL also approved rounding to "the nearest five minutes, one-tenth of an hour, one-quarter of an hour, or one-half hour as long as the rounding averages out so that the employees are compensated for all the time they actually work."
Nondiscretionary bonuses in overtime calculations
Another letter involved whether the application of nondiscretionary bonuses to an employee's overtime rate must be done retroactively. Under the FLSA, overtime is paid at 1-1/2 times the employee's regular rate of pay, and that rate includes all regular income, including nondiscretionary bonuses.
The employer here based nondiscretionary bonuses on multiple workweeks and paid those bonuses at the end of a bonus period. The employer, says the DOL, is not required to go back over each bonus period and recalculate the employee's regular rate of pay to include the bonuses. However, this employer also paid an annual nondiscretionary bonus. Therefore, it does have to recalculate the employee's regular rate of pay for the year and use that to calculate any overtime due on the annual bonus.
Some paralegals qualify for the highly-compensated employee exemption
In general, the FLSA assumes that employees are non-exempt (qualifying for the minimum wage and overtime pay) unless they meet a specific exemption, such as the executive, administrative or professional employee exemptions.
That said, if an employee makes at least $100,000 a year, they can be considered an exempt highly-compensated employee using a less restrictive test:
- Their primary duty is office or non-manual work
- They "customarily and regularly" perform at least one bona fide exempt duties of an administrative, executive or professional employee
In the letter's case, a trade organization's paralegals met the less-restrictive test and can be considered exempt.