The DOL was busy in 2020 issuing FLSA opinion letters. Three of those opinion letters concerned
whether referral bonuses should be included in the regular rate for purposes of
calculating overtime compensation, one concerned a similar question about
longevity bonuses and one concerned whether employers must pay employees for
participating in voluntary training during or outside normal working hours. The Obama Administration did not issue any such opinion letters and it remains to be seen whether the Biden Administration will continue this practice.
In FLSA
Op. No. 2020-3, the City employer passed a resolution entitling employees
to incentive compensation after five years of full-time employment in the
amount of $2/month for each year of employment.
The City currently pays it out every two weeks, but was considering
paying it in a year-end lump sum. The DOL
explained that its longevity pay was not a gift because the employees were
legally entitled to the payments, even though the legislation left it to the
City officials to determine the timing and form of the payments. If the legislation had indicated that the
City “may” provide longevity pay up to a certain amount, instead of “shall”
provide longevity pay in a specific amount, then the resolution would have
merely authorized the payments
instead of requiring them. Lump sum longevity payments whose amount, if any, would not be measured by or dependent on hours worked, production or
efficiency, were not legally required and were awarded, if at all, in the discretion of the employer could be excluded from
the regular rate as “payments in the nature of gifts.” Because the resolution mandated both the
payment and amount of the bonus, it was a legally enforceable part of the
employees’ wages and must be included in the regular rate when calculating
overtime pay.
In FLSA
Op. No. 2020-4, the employer paid a generous referral bonus to an employee
upon the hiring of a worker whom the employee referred and another generous
bonus if both the worker and the employee were still employed a year
later. Because the first bonus was
paid upon the hiring of the worker and it was not part of the employee’s duties
to recruit or hire the worker, the bonus was not related to the employee’s work
and need not be included in the employee’s regular rate.
[S]ums paid to an employee for recruiting another to join his or her employer’s workforce are not part of the recruiting employee’s remuneration for employment, if the following conditions are met (1) participation in recruitment activities is strictly voluntary, (2) the employee’s efforts in connection with recruitment activities are limited to after-hours solicitation among friends, relatives, neighbors and acquaintances as part of the employee’s social affairs.
Otherwise, referral bonuses “generally would constitute
remuneration for employment and must be included in the regular rate unless
another statutory exclusion applies.”
For instance, there is a statutory exclusion for payments similar to
gifts made at Christmas time “or on other special occasions, as a reward for
service” and the amount of the payment is not measured by or “dependent on
hours worked, production, or efficiency.”
In addition, “if the bonus ‘is so substantial that it can be assumed
that employees consider it part of” their wages or is paid pursuant to a legally
binding contract, then it would not be considered as a gift.
Nonetheless, because the second part of the bonus was contingent
in part on the employee remaining employed, it was similar to a longevity bonus
which rewards the referring employee for an additional year of service. If the bonus was payable regardless of
whether the referring employee remained employed or was payable after a brief
period of time (like a single pay period), then it would not be contingent on the
employee’s longevity and would similarly not be includable in the regular rate.
In addition, if there was no
contractually binding obligation to pay the second part of the referral bonus,
and the policy merely announced the “timing and amount of the payment,” it may
still qualify as a type of gift instead of a longevity bonus. “Mere preannouncement of the timing and
amount of a longevity bonus does not prevent that bonus from being excludable
as a gift . . .”
Finally, FLSA
Op. No. 2020-15 explored when an employer was required to compensate
employees while attending voluntary training (whether continuing professional
education, courses directly related to their jobs and courses unrelated to
their job). Generally, training the
employee receives during normal working hours is compensable even though the
employee could have received the training outside normal work hours. An employer is permitted to require employees
to attend such training outside normal work hours, when it would generally not
be compensable. The DOL did not approve
the employer’s practice of requiring employees to use paid time off to attend
courses during working hours.
In general, the DOL regulations provide that ‘attendance at
lectures, meetings, training programs and similar activities need not be counted
as working time” if the following criteria are met: the employee’s attendance is
voluntary and not during her regular working hours; the employee does not
perform any productive work during the attendance and, with two exceptions, the
course/lecture is not directly related to the employee’s job. One of the exceptions is when the employer
establishes educational programs which correspond to courses offered by
independent bona fide educational institutions and are voluntarily attended by
employees outside of working hours. Another
exception is when the employee voluntarily attends an independent school, etc.
after working hours even if the courses are related to her job.
Assuming that employee attendance was voluntary and the
employee did not perform any productive work, the DOL addressed the following
situations:
1.
The employer is NOT required to compensate an employee
who uses tuition reimbursement to attend outside working hours a webinar that
is directly related to her job and also satisfies professional continuing
educational requirements.
2.
It is questionable whether an employer is
required to compensate an employee who uses tuition reimbursement to attend a
webinar outside working hours that is directly related to his job, but does not
satisfy professional continuing educational requirements because it was unclear
whether the webinar corresponds to courses offered by educational institutions.
3.
The employer is required to compensate the same employee
who attends the webinar during working hours.
It is irrelevant that the employee could have chosen to attend outside
normal working hours.
4.
The employer is required to compensate an
employee who uses tuition reimbursement to attend during working hours a
webinar that does not satisfy professional continuing education requirements
and is not directly related to his job.
5.
The employer is required to compensate an
employee who uses tuition reimbursement to attend a webinar during working
hours that is required for professional continuing education, but is not
directly related to her job.
6.
The employer is NOT required to compensate an
employee who uses tuition reimbursement to attend a weekend seminar outside her
normal working hours that is directly related to her job and satisfies professional
continuing educational requirements and is also not required to compensate her
for her personal time traveling to and from the seminar even though the travel
occurred during her normal working hours.
The travel at her own option for her sole convenience is not considered
to be working hours.
NOTICE: This summary is designed merely to inform and alert
you of recent legal developments. It does not constitute legal advice and does
not apply to any particular situation because different facts could lead to
different results. Information here can change or be amended without notice.
Readers should not act upon this information without legal advice. If you have
any questions about anything you have read, you should consult with or retain
an employment attorney.
