DOL Issues Opinions on Retail Overtime Exemption and Wage Garnishment Calculations

The U.S. Department of Labor (DOL) recently announced a new opinion letter from the Department’s Wage and Hour Division (WHD) on how to measure the compensation requirement of the Fair Labor Standards Act (FLSA) overtime exemption for retail or service establishments.

Specifically, to qualify for the retail/service establishment’s overtime exemption, over half of an employee’s compensation, over the course of “not less than one month,” must comprise of commissions. The WHD stated the duration of “month” means at least one calendar month. Thus, measuring compensation over four weekly pay periods or two bi-weekly pay periods would not meet the standard. However, the measurement does not need to correspond to a “period encompassing all of the days within one of the twelve named months of the year,” for example, where the measurement would be six weekly pay periods or three bi-weekly pay periods. Employers should review compensation calculations for compliance.

In another opinion letter issued on the same day, the WHD stated that employer contributions to employees’ health savings accounts (HSAs) are not considered earnings for wage garnishment purposes under the Consumer Credit Protection Act (CCPA), and therefore are not subject to the CCPA’s garnishment limitations. Once contributions are deposited into an HSA, as in depositing to a trust or bank account, they are past the point where they can be withheld by or garnished by an employer. Even if the amounts could be subject to garnishment before being deposited, an employer’s contribution to an HSA is not made to “compensate the employee directly for the amount or value of his or her services.” Moreover, the CCPA “‘is meant to protect funds as they pass from the employer to the employee.’” Therefore, employers “should not include … HSA contributions when calculating the employee’s disposable earnings for purposes of determining the maximum amount of an employee’s pay that may be garnished under the CCPA.”

Opinion letters are responses from the WHD to submitted queries, are primarily informative in nature, and are published by the WHD to clarify or interpret existing regulations. In short, they act as a guide for employers to glean how the DOL would treat similar situations.

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