By Payroll and Entitlements Editorial Staff
The Labor Department’s Wage and Hour Division (WHD) has released two new opinion letters—a move its says "demonstrates the agency's continued commitment to providing meaningful compliance assistance to help employees understand their rights and ensure that employers have the information they need to comply with federal labor laws."
Employees with varying average hourly rates. In a December 21, 2018, opinion letter (FLSA2018-28, 16-18 CCH-WH ¶31,640), the WHD provides guidance on how to determine minimum wage and overtime compliance when employees have varying average hourly rates. The letter responds to a query about an employer that provides home health aide services to its clients in their homes. Some of its employees travel between client locations during the workday. To calculate weekly pay, the employer multiplies an employee’s time with clients by his or her hourly pay rate, then divides the product by the employee’s total hours worked, which includes both client time and travel time. The employer guarantees that the quotient meets both federal and state minimum wage rate requirements. A typical rate of pay is $10.00 an hour with a client including travel time; if an employee works more than 40 hours (total paid hours and travel time) in a workweek, he or she is paid time and a half for all time over 40 hours at a rate of $10.00 an hour.
Minimum wage. The Acting Administrator concluded that the employer’s compensation plan complies with the FLSA’s minimum wage requirements. While an employee’s average hourly pay rate may vary from workweek to workweek, the employer always ensures that the average hourly pay rate exceeds the FLSA’s minimum wage requirement for all hours worked.
Overtime. However, the compensation plan may run afoul of the FLSA’s overtime requirements. If the employer always assumes a regular rate of pay of $10 an hour when calculating overtime due, then it will not pay all overtime due to employees whose actual regular rate of pay exceeds $10 an hour. Employers and employees may not arbitrarily choose the regular rate of pay—"it is an ‘actual fact’ based on ‘mathematical computation,’" the Administrator said, citing Walling v. Youngerman-Reynolds Hardwood Co., Inc. (325 U.S. 419, 424–25 (1945)) and 29 C.F.R. 778.108.
The compensation plan does comply with the FLSA’s overtime requirements for all employees whose actual regular rates of pay are less than $10 per hour, however, because an employer may choose to pay an overtime premium in excess of the statutorily required amount.
Ministerial exception. A second opinion letter (FLSA2018-29, 16-18 CCH-WH ¶31,641), also dated December 21, offers guidance on the how the ministerial exception applies to members of an egalitarian religious commune. The Acting Administrator concludes that the members are not subject to the FLSA because their "activities do not fit any ‘traditional employment paradigm covered by the Act,’… or ‘work or employment … as those words are commonly used.’"
Notably, the community members do not work at a for-profit enterprise and do not expect to receive compensation in exchange for their services, which are factors that indicate they are not employees under the FLSA. These are relevant considerations "regardless of whether the members” motivation to live in this manner is based on religious conviction, as here, or on a secular ideology, as might be true in other cases, as long they have chosen to donate their services free of coercion by the community," the letter states.
Further, even if they might otherwise be considered employees under the FLSA, the members "fall squarely within the ministerial exception recognized in Hosanna-Tabor,” according to the WHD.
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