In July 2008, the Department of Labor’s Wage and Hour Division (WHD) published proposed rules that would change several regulations issued under the Fair Labor Standards Act (FLSA) and the Portal-to-Portal Act, including tip credit, fluctuating workweek, compensatory time, commuting, and other provisions. The proposed rules were not finalized during the previous Administration; however, a final rule was published in the Federal Register on April 5, 2011, and will take effect in 30 days.
One of the primary changes is an update to the regulations regarding “tip credit” to reflect increases in the minimum wage. Tip credit means that an employer can pay to a tipped employee an hourly wage less than the legal minimum, so long as a combination of that less-than-minimum wage and the person’s tips equals at least the legal minimum wage. The final rule raised the maximum federal tip credit from $4.42 an hour to $5.12.
Other changes made include clarification of certain overtime exemptions for employees engaged in firefighting activities (allowing such employee to engage in a certain amount of non-exempt work), as well as an adoption of the youth opportunity wage provision, which allows an employer to pay a less-than-minimum wage to an employee under the age of 20 for the first 90 calendar days of employment.
While the DOL implemented some changes in the new rules, the Department’s unwillingness to make certain other expected changes is what seems to be getting the attention of employers and employees. Notably, the DOL declined to adopt changes on several existing regulations including those on compensatory time, fluctuating workweek, and meal credits. It also refused to exempt a service manager, service writer, service advisor or service salesman from overtime.
According to Al Robinson, formerly the acting Administrator of the Wage and Hour Division (WHD) of the DOL (prior to joining the Washington DC office of Ogletree Deakins), “to say that the final rule is ‘narrower’ than the rule proposed in July 2008 is an understatement because it is a missed opportunity to add some clarity, especially on the topic of the fluctuating workweek.” In the fluctuating workweek, a salaried non-exempt employee’s hours vary from week to week. The esoteric issue of concern was whether a bonus or other premium payment should invalidate the fluctuating workweek method by being included in the calculation of the employee’s “regular rate” of pay. While the proposed regulation would have provided that a bonus or premium payment does not invalidate the fluctuating workweek method of compensation, the final rule restores the current situation in which a fixed salary amount is paid as straight time for hours worked, and a bonus or premium payment is calculated and paid separately. Unfortunately, however, the final rule does nothing to illuminate generally or further explain the fluctuating workweek, a concept in dire need of explication.