On Jan. 7, 2020 the U.S. Department of Labor (DOL) issued two opinion letters that clarify how the Fair Labor Standards Act (FLSA) applies in specific situations. Opinion letters provide the DOL’s official opinion on how the law applies in specific situations. Employers that rely on opinion letters may be able to establish a “good faith defense” under the law. As a result, employers should become familiar with these letters and review their practices to ensure compliance with FLSA requirements.

FLSA 2020-1: Lump Sum Nondiscretionary Bonuses Must Be Included in Regular Rate

In its first letter, the DOL asserts once again that employers must include nondiscretionary bonuses in their employee’s regular wage rate calculations. In addition, the opinion letter outlines how employers may go about allocating lump sum nondiscretionary bonuses that cover more than one workweek. This guidance is important to employers calculating overtime pay for employees who received such bonuses.

FLSA 2020-2: Per-Project Pay Can Satisfy the Salary Basis Test

In its second letter, the DOL asserts that per-project payments can satisfy the fee basis test if the payments do not vary from pay period to pay period, vary based on the number of hours worked, or vary based on the quality of the work performed. The DOL also explains that occasionally, employers may increase or reduce an exempt employee’s project compensation if the changes in pay are tied to changes in the scope of the project.

However, an employee’s exempt status may be undermined if contract or project revisions are too frequent.

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