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June 02, 2011
DOL Makes Limited Changes: More to Come

Completing a process that began in 2008, the Department of Labor has issued final regulations meant to clarify and correct principles of the Fair Labor Standards Act (FLSA) and reflect amendments made during the last 30+ years. The regs cover a wide variety of changes, but here we’ll deal only with those we believe affect the most employers. Note that they were effective May 5, 2011.

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Biggest changes involve tip credits, comp time. Employers that wish to take tip credits from employees must give them full notice they will do so. The notice must include the amount of the cash wage they will be paid, the amount of tip credit the employer is taking (the total of those two can’t be more than the difference between the minimum wage of $7.25 and the cash wage), that the credit can’t be more than the employee actually gets in tips, and that all tips received are employees’ property except for valid pooling arrangements.

The regs note that FLSA doesn’t cap the percentage of employees’ tips that can be given to a pool. Observers have noted that this DOL change contradicts a ruling by the 9th Circuit, which said that all tips belong to employees unless an employer takes the tip credit.

For public employees—the only ones who can be given compensatory time in lieu of wages, one change they had wanted was rejected by DOL. Some of them had asked to be able to schedule such time off, much as they do with vacation time. And, an early proposal in the regs was that public employers would have to grant the comp time exactly as employees had requested it. Instead, the regs say, employers need only grant the time off within a reasonable period. Note that the final regs make adjustments for FLSA amendments as long ago as 1974. They include changes in 1996 regarding the compensability of commuting time in employer-owned vehicles.

Regs affect fluctuating workweek, fire protection activities. In another instance, DOL chose not to implement a change involving the fluctuating workweek method of calculating overtime. An earlier proposal was to permit payments of bonuses and incentives for reasons other than overtime “without invalidating the guaranteed salary criterion required for the half-time overtime pay computation.” DOL concluded that while bonuses and incentives can benefit employees, the extra pay is “incompatible with the fluctuating workweek method of computing overtime,” so the payments were not permitted. Another proposal—to exclude rescue and ambulance service workers from the definition of employees engaged in fire protection activities—was also rejected by DOL.

Other changes in the regs involve meal credits, boat sellers, and automobile service managers. And, there are still more regulations coming; they were promised by the end of April but did not arrive. First, these will require employers to explain to all employees how the company calculates their pay. Second, these regs will require employers to document in writing—and inform the employees involved—why they have been classified as exempt from FLSA.

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