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The U.S. Department of Labor (DOL) published a final rule concerning the joint employer standard, as well as two Fair Labor Standards Act (FLSA) opinion letters providing guidance on specific wage and hour inquiries. Below are key takeaways from each of these updates.
Update to the FLSA’s Joint Employer Standard
Businesses who employ an individual working for one or more organizations may be a “joint employer” under the FLSA. The standard for determining when a business is a joint employer has seen a lot of discussion in recent years. Now, the DOL has issued a final rule to update the joint employer standard. Effective March 6, 2020, the DOL will utilize a four-factor balancing test to determine FLSA join employer status, which examines whether the potential joint employer:
- Hires or fires the employee;
- Substantially supervises and controls the employee’s work schedule or condition of employment;
- Determines the employee’s rate and method of pay; and
- Maintains the employee’s employment records.
The final rule also clarifies when any additional factors may be relevant to determining joint employer status, and further identifies business models, contract agreements, and other practices that do not make joint employer status more or less likely.
FLSA2020-1: Overtime Calculation in Multi-Week Bonus Periods
The DOL’s January 7, 2020 opinion letter clarifies how an employer calculates overtime pay for a non-discretionary lump sum bonus spanning a time period of several weeks. In this example, the business offered employees a lump sum bonus of $3,000 for completing a 10-week training program. However, through the course of the training period, the employees could work variable hours, raising the question on how the bonus should be distributed and added to the employees’ compensation for the purpose of calculating overtime.
Because the employees were required to complete the 10 weeks of training to receive the bonus, the DOL determined that each week is equally weighted to fulfil the eligibility criteria. No other information presented indicated that the amount of overtime hours worked in any particular week affected the non-discretionary bonus. Absent such factors, employers are permitted to allocate non-discretionary bonuses equally over each week of the multi-week bonus period for the purpose of calculating the overtime rate.
FLSA2020-2: Per-Project Pay for Exemption Salary Threshold
In this January 7, 2020 opinion letter, an employer hiring educational consultants to develop curriculum on a per-project basis sought clarification on how the business could pay the consultant on a salary basis and meet applicable FLSA requirements. The opinion letter indicates that paying an exempt consultant in pre-determined, equal biweekly or monthly installments would suffice so long as (1) the number of hours worked and quality of work do not change or vary the amounts paid, and (2) the predetermined installments meet the minimum salary threshold. Additional increases or decreases in compensation (e.g., changes in scope or length of time of the project) will not affect the FLSA exemption as long as the minimum salary threshold is still met.
- Review joint employer relationships with legal counsel.
- Review calculation of nondiscretionary bonuses and pay for project-based employees.
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Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser.
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