New England Biz Law Update
After nearly a 10-year hiatus, the U.S. Department of Labor’s Wage and Hour Division recently issued three formal opinion letters, setting forth its views on various wage-and-hour issues addressed to the WHD by interested parties.
Opinion letters represent official WHD policy and are provided to help employers, employees and other members of the public understand their rights and responsibilities under the law.
The Obama administration officially abandoned WHD opinion letters in 2010, but Secretary of Labor Alexander Acosta recently restored the practice of issuing these guidance documents.
The three recently released opinion letters address the following issues: (i) whether certain employee travel time qualifies as “work time” under the Fair Labor Standards Act; (ii) whether an employer must compensate an employee for hourly 15-minute rest breaks required by an employee’s serious health condition; and (iii) whether various types of lump-sum payments made to an employee constitute “earnings” subject to garnishment limitations under the Consumer Credit Protection Act.
Compensable employee travel time
The first WHD opinion letter addresses whether an employee’s travel time is compensable in three specific scenarios: (i) an hourly technician travels by plane on a Sunday to a different state to attend a training seminar running Monday through Friday; (ii) an hourly employee, using a company vehicle, travels from home to the company office and then travels to a customer location; and (iii) an hourly technician drives from home to multiple customer locations on any given day.
Regarding scenario (i), the WHD observes that “travel away from home is clearly worktime when it cuts across the employee’s workday. The employee is simply substituting travel for other duties.”
Conversely, the WHD does not consider work time to encompass “time spent in travel away from home outside of regular working hours.” Accordingly, the central issue in this fact pattern is whether travel time is compensable when an employee does not have regular working hours.
Rather than providing a definitive answer as to how this question should be resolved, the letter states that whether travel time takes place during an employee’s regular working hours should be determined on a case-by-case basis, based on the specific facts.
In this regard, WHD carefully scrutinizes an employer’s claim that its employees do not have regular working hours. Even if an employee’s working hours vary from week to week, trends can be established, and consistencies may be found in, for example, start and stop times.
Regarding scenarios (ii) and (iii), the division emphasizes that “compensable worktime generally does not include time spent commuting to or from work,” but that “travel from job site to job site during the workday must be counted as hours worked.” It is of no consequence, therefore, whether an employee’s initial trip takes him or her from home to the employer’s office or from home to a customer location. That commuting time is not compensable. Thereafter, however, any travel between work sites is compensable.
Finally, WHD opines that the use of a company vehicle generally does not make otherwise non-compensable travel time compensable.
This is true provided that “the use of such vehicle for travel is within the normal commuting area for the employer’s business or establishment and the use of the employer’s vehicle is subject to an agreement on the part of the employer and the employee … .”
Medically required breaks
In the second opinion letter, the WHD opines on whether a non-exempt employee’s hourly 15-minute rest breaks — certified by a health care provider as required by a serious medical condition (and thus covered under the Family and Medical Leave Act) — are compensable under the FLSA. The WHD concludes that such breaks are not compensable.
Though the FLSA does not explicitly define “compensable” time, the U.S. Supreme Court has held that the compensability of an employee’s time depends on “whether [it] is spent predominantly for the employer’s benefit or for the employee’s.”
The opinion letter references recent 3rd U.S. Circuit Court of Appeals case law holding that short rest breaks of up to 20 minutes “primarily benefit[] the employer.” Thus, according to the WHD, “rest breaks up to 20 minutes in length are ordinarily compensable.”
The letter goes on to state, however, that “[i]n limited circumstances … short rest breaks primarily benefit the employee and therefore are not compensable.” In the scenario at issue here, taking a 15-minute break every hour through an eight-hour shift would mean that the employee would perform a total of only six hours of work over that shift. As the WHD indicates, this “differ[s] significantly from ordinary work breaks commonly provided to employees.”
Further, the WHD notes that the FMLA expressly provides that leave may be unpaid and “provides no exception for breaks up to 20 minutes in length.” Therefore, the WHD concludes that because the “FMLA-protected breaks [at issue] are given to accommodate the employee’s serious health condition, the breaks predominantly benefit the employee and are non-compensable.”
In addition to clarifying the law, these documents offer an affirmative defense to monetary liability if an employer can plead and prove it acted “in good faith in conformity with and in reliance on” an opinion letter.
Lump-sum payments and the CCPA
The last opinion letter addresses whether the Consumer Credit Protection Act’s garnishment limitations apply to certain lump-sum payments to employees. Title III of the CCPA limits the percentage of an employee’s earnings that can be garnished for “the support of any person” — typically child support.
There is little debate that an employee’s regular earnings — whether paid weekly, biweekly or monthly — fall within the CCPA’s garnishment limitations. However, it is less clear whether the CCPA’s garnishment limitations apply to infrequent, lump-sum payments made to employees.
In response to a request for specific guidance on this issue, the WHD’s opinion letter analyzes 18 separate types of lump-sum payments that may be made to employees, including commissions, various forms of bonuses, profit-sharing distributions, moving and relocation expenses, attendance and safety awards, retroactive merit increases, workers’ compensation, termination and severance pay, insurance settlements, and buybacks of company shares.
According to the WHD, the determinative issue is “the compensatory nature of the payment, i.e., whether the payment is for services provided by the employee.” This standard applies regardless of whether a lump-sum payment is one-time or occasional.
The opinion letter concludes that the majority of the types of lump-sum payments considered do constitute “earnings” under the CCPA. For example, the WHD considers commissions and bonuses to be earnings because they are intended to compensate an employee for personal services rendered. The same holds true for retroactive merit increases, holiday pay and monies due upon termination.
The WHD similarly opines that unusual lump-sum payments — such as signing and referral bonuses, moving and relocation expenses, and profit-sharing distributions — constitute “earnings” because they are paid out in connection with the employee’s provision of services to the employer.
Even severance pay tied to an employee’s length of service constitutes earnings under the CCPA, in the WHD’s view, because it is compensation related directly to the employee’s service to the employer.
Certain portions of workers’ compensation and insurance settlements, however, do not qualify as earnings under the CCPA. The WHD observes that workers’ compensation payments made to replace lost wages qualify as earnings under the CCPA, whereas reimbursements of medical expenses do not qualify.
Likewise, the WHD states that the portion of settlement proceeds for a claim of wrongful termination attributable to past and future earnings constitutes earnings under the CCPA.
The opinion letter concludes that only one of the types of lump-sum payments analyzed unconditionally does not constitute earnings under the CCPA — buybacks of company shares. The WHD states that “[t]here is no nexus between personal services rendered and the company’s decision to repurchase the stock.”
Accordingly, lump-sum payments made to an employee pursuant to a stock buyback are not earnings subject to the CCPA’s garnishment limitations.
Recommendations for employers
There are concrete steps employers can take to comply with these WHD guidelines.
First, for non-exempt employees who travel and have undefined working hours, an employer may be able to establish regular working hours through time records, or negotiate with employees a reasonable amount of travel time that will be deemed to occur “outside” of regular working hours and, thus, be compensable.
Second, human resources and payroll personnel should identify any non-exempt employees requiring hourly (or similarly frequent) breaks due to medical conditions, and ensure that such breaks are unpaid.
Finally, employers should be mindful that the majority of lump-sum payments made to employees are subject to the CCPA’s garnishment limitations.
Employers should pay close attention to these and future WHD opinion letters. In addition to clarifying the law, they offer an affirmative defense to monetary liability if an employer can plead and prove it acted “in good faith in conformity with and in reliance on” an opinion letter.
Anthony L. DeProspo Jr. practices at Schwartz Hannum in Andover, Massachusetts, which represents management in labor and employment law matters, as well as educational institutions.
