On Tuesday, August 27, 2019, President Trump formally nominated Eugene Scalia to serve as Secretary of the United States Department of Labor. The Department of Labor is responsible for enforcing federal laws governing the employment relationship, most notably the Family and Medical Leave Act, the Employee Retirement Income Security Act, and the Fair Labor Standards Act. Scalia is the son of the late United States Supreme Court Justice Antonin Scalia and formerly served as the top legal officer for the Department of Labor during as an appointee of former President George W. Bush. Scalia is currently in private practice representing business and management interests in labor disputes. He received his undergraduate degree from the University of Virginia and his law degree from the University of Chicago Law School.
The Senate Health, Education, Labor, and Pensions Committee will conduct a confirmation hearing regarding Scalia’s nomination when Congress returns from summer recess. Given the Republican majority in the Senate, his nomination is likely to be confirmed despite opposition from Democrats and unions. Scalia’s predecessor was Alexander Acosta, who resigned on July 12 amid scrutiny relating to his handling of the first sex crimes cases involving Jeffrey Epstein when Acosta was a federal prosecutor in Florida.
While awaiting Scalia’s confirmation, employers would be wise to peruse the Department of Labor’s guidance in three recent Opinion Letters that were issued through its Wage and Hour Division (WHD) on July 1, 2019. While Opinion Letters do not constitute legal precedent, they provide helpful guidance regarding the WHD’s position as to acceptable compliance and timekeeping processes under the federal Fair Labor Standards Act (FLSA).
This Opinion Letter addresses the calculation of overtime pay for non-discretionary bonuses and determines that an employer must recalculate an employee’s regular rate of pay for purposes of overtime compensation after a non-discretionary bonus is paid based on an employee’s hours during the time period at issue. Such a calculation requires a retrospective recalculation for bonuses paid annually. This Opinion Letter helps to clarify timing issues that have arisen in this analysis.
This Opinion Letter addresses the applicability of the highly compensated employee exemption for paralegals but would apply equally for similarly situated employees. In order to qualify for exempt status as a highly compensated employee, an individual must (1) have a primary duty that involves office or non-manual work; (2) earn annual compensation of at least $100,000.00, and (3) customarily and regularly perform any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee. In order to be exempt under the administrative exemption, the most closely analogous exemption for a paralegal position, an employee must have as a primary duty work that is office or non-manual work directly related to the management or general business operations of the employer and have a primary duty that includes the exercise of discretion and independent judgment with respect to matters of significance. In applying these standards to highly compensated paralegals, the WHD determined that it was appropriate to give a “fair (rather than narrow) interpretation” of these exemptions and that if the paralegal performs one or more exempt duties “more than occasionally”, a “fair reading” of the FLSA exemptions would conclude that the paralegal is properly classified as exempt. The takeaway for employers is that while the factors for exemption may be looser for highly compensated employees, analysis of employee job duties and position descriptions remains critical in order to avoid the risks involved in misclassification.
This Opinion Letter outlines permissible rounding practices in recording employees’ hours worked and approves an employer’s use of a software program that rounds the amount of time worked to two decimal points in order to calculate employees’ pay. The WHD determined that such a practice is acceptable so long as doing so “will not result, over a period of time, in failure to compensate the employees properly for all time they have actually worked.” In the fact scenario presented, since the software system at issue was neutral (i.e., it rounded both up and down based on a pre-designated rounding point), the practice was acceptable. This Opinion Letter serves to clarify a technical issue relating to the calculation of hours worked.
It remains to be seen how the Department of Labor will function under the supervision of a new Secretary. However, employers should remain proactive. FLSA wage and hour laws are complex and challenging, and while these Opinion Letters provide valuable guidance, they are no substitute for proper analysis and auditing of internal pay structures and systems in order to mitigate risk. Penalties for violation of FLSA regulations are often significant.