As we reported earlier, after a hiatus during the Obama Administration, opinion letters are back and the United States Department of Labor (DOL) recently issued six new ones.

Quick Refresher

Opinion letters are official, written opinions from the Wage and Hour Division (WHD) on “how a particular law applies in specific circumstances presented by the person or entity requesting the letter.” The DOL encourages the public to submit requests for opinion letters; however, the request must state that the opinion is not sought by a party in a WHD investigation or for use in any litigation that was initiated prior to the submission of the request.

The Facts about Paying for Wellness

Be Well without Running Afoul of the FLSAOne of the newly issued opinion letters addresses whether the FLSA requires an employer to compensate an employee for time spent voluntarily participating in certain wellness activities, biometric screenings, and benefits fairs. The fact pattern presented to the DOL was as follows:

An employer makes available to its employees opportunities to participate in “biometric screenings,” which test, among other things, cholesterol levels, blood pressure, and nicotine usage. The employer does not require the screening, and it is entirely the employee’s choice to participate. The screenings are in no way related to the employee’s job duties; however, the employee may be screened both during and outside of regular work hours. An employee’s participation in the screening could decrease the employee’s health insurance deductibles.

An employee may also participate in other “wellness activities” to decrease his or her monthly insurance premiums, including (1) attending in-person health education classes; (2) using the employer-provided gym; (3) participating in telephonic and online health education classes facilitated by the employer; (4) participating in Weight Watchers; and (5) voluntarily engaging in a fitness activity. As with the biometric screening, the employer does not require anyone to engage in those wellness activities, and the activities are not related to the employee’s job.

Lastly, the employer allows employees to attend benefits fairs on such topics as financial planning, employer-provided benefits, or college attendance opportunities. Those fairs are not part of an employee’s orientation, are open to all employees, are not related to the employee’s job duties, and are entirely optional.

The DOL’s Opinion

The FLSA requires employers to compensate employees for their work, but does not explicitly define “compensable work.” That said, in reaching its ultimate conclusion, the DOL relies on the U.S. Supreme Court’s 1944 determination in Armour & Co. v. Wantock that the compensability of an employee’s time depends on “whether it is spent predominantly for the employer’s benefit or for the employee’s.” The DOL also relies upon separate regulations relieving employers of their obligation to compensate an employee for “off duty” time, i.e., “periods during which an employee is completely relieved from duty and which are long enough to enable him to use the time effectively for his own purposes.”

Considering all of those factors, the DOL opined that “an employee’s voluntary participation in biometric screenings, wellness activities, and benefits fairs predominantly benefits the employee.” It reached that conclusion, in part, because the activities (1) provide financial benefit to only the employee, (2) help the employee make decisions about matters unrelated to his or her job; (3) are wholly optional; and (4) are not required in conjunction with any job-related duty. As such, the DOL concluded that engaging in those activities does not constitute compensable worktime under the FLSA.

The DOL specifically concluded that participation in those activities was not compensable even during normal work hours, because the activities constitute non-compensable “off duty” time, provided the employee may use the time engaging in those activities “effectively for his or her own purposes.”

Takeaway

Employer wellness programs are all the rage. The DOL’s recent opinion offers clear guidance to employers on how to structure a wellness program in a manner that does not require the employer to pay employees for using the program:

  • Make available financial benefits personal to the employee (not to the company);
  • Provide information that employees need to make decisions related to their lives—not their jobs; and
  • Make it voluntary.

Combining Classrooms and Class Actions: Trump Proposes Combining Labor and Education DepartmentsCould the Department of Labor (DOL) and Department of Education (DOE) possibly merge in the near future? President Trump thinks so and recently announced his desire to combine the two departments into a single federal agency to be called the Department of Education and the Workforce. According to a White House Statement, the new agency would be “charged with meeting the needs of American students and workers from education and skill development to workplace protection to retirement security.” The proposed restructuring would provide for four sub-agencies: K-12, Higher Education/Workforce Development, Enforcement, and Research/Evaluation.

Current Status

DOE is the smallest cabinet agency with just under 4,000 employees and a $68 billion budget, and oversees federal student loans, distributes K-12 education funding, and enforces civil rights laws at colleges. DOL, by contrast, has about 15,000 employees and a $13 billion budget to support its broad agenda of training programs, enforcement of wage and safety laws, and the Bureau of Labor Statistics.

The proposal is part of a larger plan by the administration to reorganize and reduce the size of federal government agencies. Other combinations of sections of federal agencies have been discussed by the OMB, which itself may have a shrinking role.

Reactions to the Proposal

Not surprisingly, reaction to the proposed combination has been mixed. Current administration members support it. Secretary of Education Betsy DeVos promoted the idea to help break down “artificial barriers” between education and career development. Mick Mulvaney, director of the federal OMB, spoke in favor of the plan to reduce the size of the federal government which he described as “bloated, opaque, bureaucratic, and inefficient.”

Opponents say it would be a bad idea. Chris Lu, a former Deputy Secretary of Labor under President Obama, pointed out that only parts of the two agencies deal with worker training because most of DOL consists of enforcement agencies such as OSHA, MSHA, Wage & Hour, and OFCCP that were created to protect workers. The National Employment Law Project (a union-backed think tank) denounced the proposal as a “half-baked idea” that would only betray the workers for whom President Trump pledged to advocate.

Members of the business community may welcome entities such as OSHA and MSHA falling under the DOE, which has a more educational (and less enforcement-oriented) focus.

Likely to Happen?

Odds of the combination actually coming to fruition seem unlikely. Congress has to approve a major reorganization of cabinet departments, which means 60 votes in the Senate. POLITICO (a Washington, D.C. political news outlet) surmised that the plan “would pose a heavy political and legislative lift” as previous attempts to eliminate the DOE have failed in Congress. President Obama had his own reorganization plan in 2012 that never went anywhere. Seth Harris, Deputy Secretary of Labor under President Obama, predicted that the merger will not happen.

From a high level, some of the mandates of these two agencies overlap. One pursues education to enter the labor force while the other focuses on the workforce (with some training programs). The proposed merger faces many obstacles before the finer details are even discussed, such as what (and who) gets cut. If nothing else, the announced plan has attracted attention, and it is worth keeping an eye on. Having DOL sections combined and altered with a focus on education (rather than just on enforcement) would certainly be a game changer for many employers.

When Lump-Sum Payments to Employees are Earnings for Garnishment Purposes

Welcome to Part 3 of our series on the Department of Labor’s three new opinion letters. We previously looked at the opinion letters on FMLA intermittent breaks and travel time compensation. If you missed those posts, you can catch up here (FMLA breaks) and here (travel time).

When Lump-Sum Payments to Employees are Earnings for Garnishment PurposesNext up is the wage garnishment letter, which analyzes when a lump-sum payment to an employee constitutes “earnings” subject to garnishment under Title III of the Consumer Credit Protection Act (CCPA). As background, the CCPA limits the amount of earnings that may be garnished pursuant to court orders, such as for child support. Those limits are 50% of an employee’s disposable earnings (i.e., earnings after applicable withholdings) if the employee is supporting another spouse or child, or up to 60% of disposable earnings if the worker is not. (Garnishments may be subject to additional limits under applicable state law.)

The CCPA recognizes “earnings” as any “compensation paid or payable for personal services, whether denominated as wages, salary, commission, bonus, or otherwise, and includes periodic payments pursuant to a pension or retirement program.” As the DOL has previously noted, earnings under the CCPA include lump-sum payments made in exchange for the employee’s services. This new opinion letter addresses three categories of lump-sum payments: earnings, partial earnings, and not earnings.

Earnings Subject to Garnishment

Most lump-sum payments to employees are earnings and thus, as subject to garnishment. Though the CCPA specifically identifies commissions and bonuses as earnings, the letter emphasizes that bonuses in particular come in many forms: signing bonus, referral bonus, relocation incentive, attendance award, etc. Regardless of its name, all of these are still bonuses subject to garnishment. Similarly, retroactive merit increases, holiday pay, or termination pay are all tied to an employee’s work and thus are earnings and garnishable.

Partial Earning Maybe Subject to Garnishment

Some lump-sum payments are partially earnings, such as workers’ compensation and lawsuit settlements. In the workers’ compensation context, for example, an employee may receive payments to replace lost wages as well as medical expenses. The wage substitute payments are earnings (subject to a garnishment order), and the medical expenses are not. Similarly, for a lawsuit settlement, if an employee receives some portion for lost wages and another portion for compensatory damages, any payment for wages counts as an earning (garnishable), but compensatory or punitive damages would not.

Not Earnings Not Subject to Garnishment

Lastly, the letter recognizes only one instance in which a lump-sum payment is categorically not an earning: the buyback of company shares from the employee.

As always, ask your lawyer if you have questions about what constitutes earnings. Questions about lump-sum payments also appear frequently in the wage and hour context—if a non-exempt employee receives a non-discretionary bonus, that amount should be factored into his or her hourly rate for overtime calculations.