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U.S. Labor Department Issues Two New Opinion Letters on Overtime Questions

    Client Alerts
  • January 23, 2020

The U.S. Department of Labor’s Wage and Hour Division continues to periodically respond to employer questions with regard to particular wage payment issues. Earlier this month, the division issued two new opinion letters dealing with overtime during employee training and whether per-project payments can be used to satisfy the salary requirement for certain overtime exemptions.

In the first letter, the employer pays a non-discretionary lump sum bonus to employees who complete a multi-week training course. During some of those training weeks, employees work more than 40 hours. The employer sought clarification on whether the bonus needs to be included in the employee’s regular rate for overtime pay purposes, and if so, how it should be allocated over the training period. DOL replied that because the bonus was an inducement to complete the training course, it must be included in the employees’ regular rate. The employer can allocate equal portions of the bonus to each week of the training for purposes of retroactive overtime calculations.

The second letter dealt with employee consultants who are paid biweekly installments per project accepted. The per-project payment amounts do not vary and are not based on the quality of the work performed. Although the employee’s total compensation may vary based on the number of projects accepted during the year, it always meets the minimum salary test for the relevant exemption. Additional payments resulting from new work accepted fall under extra compensation provisions in the salary test and must comply with the requirements of 29 C.F.R. §541.604(a). Absent evidence of an attempt to manipulate compensation for overtime avoidance purposes, paying employees on a fee or project basis alone will not defeat a claim for the overtime exemption.