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.

When Traveling Employees Are Due Compensation (Or Not)

When Traveling Employees Are Due Compensation (Or Not) Welcome to Part 2 of our series on the Department of Labor’s three new opinion letters. Last week, we looked at the new opinion letter on FMLA intermittent breaks. If you missed that post, you can catch up here. Next up is the travel time letter.

The Facts

A crane repair company asked the DOL to clarify when it must pay its technicians for their travel time and asked for guidance on three scenarios. The letter examines all three scenarios and explains why the company must pay the technicians for that time (or not).

Scenario 1

An hourly technician travels on a Sunday by plane to an out-of-town training class and attends the class from Monday to Friday. The technician then flies back home on Friday or, if a Friday flight is unavailable, on Saturday.

The DOL explains that travel time is compensable work time when it cuts across the employee’s regular workday. Travel on public transportation outside of regular work hours, however, does not constitute worktime and thus does not require compensation. (The same goes for an employee who turns down a plane ticket and opts to drive instead.)

The letter also addresses what to do if the employee does not have a “recognized workday.” If the employee has an inconsistent schedule, the employer should try to ascertain the employee’s average work hours to determine if and when travel time must be compensated. The DOL recommends reviewing employee time records for average start and end times and paying the employee for travel time within that window.

Lastly, the DOL clarifies that the traveling employee is not due compensation for his commute between the training site and the hotel in which he stays during his trip. As far as the FLSA is concerned, this is no different from an employee commuting between work and home during a regular day.

Scenarios 2 & 3

In the second and third scenarios, an hourly technician travels in a company-owned vehicle from home either to the office to pick up an itinerary (Scenario 2) or to multiple customer locations (Scenario 3), after which he travels to and from other customer locations throughout the day. Depending on where the technician lives, the home-to-office commute can range from 15 minutes to one hour or more.

The DOL notes that the same principles apply to Scenarios 2 & 3 that applied in Scenario 1. A technician’s travel time from his home to his first stop of the day, whether it’s the office or a customer location, is generally not compensable other than in extraordinary circumstances (i.e., a customer site several hours away). Once the technician arrives at the first stop, however, he or she is on the clock and must be compensated for travel between stops throughout the workday.

If you have employees who travel during the workday or are sending an employee out of town for business and have questions, ask your lawyer for clarification on the front end about whether they are due compensation. Tune in next week for the third and final opinion letter.

FMLA-Covered 15-Minute Rest Breaks Are Not Compensable

Last July, we posted on the U.S. Department of Labor’s announcement that it was reviving its practice of publishing opinion letters as guidance on wage and hour issues, which the Obama Administration halted in 2010. After leaving us all on pins and needles for months, the DOL has finally issued three new opinion letters. The letters address the following topics (drum roll, please…): 15-minute rest breaks for serious health conditions; employee travel time; and lump-sum payments to employees. Below is a summary of the 15-minute break letter; we will post separately on the other two topics.

The Scenario

Reunited and It Feels So Good—The DOL’s Opinion Letters Are Back (Part 1 of 3)Letter FLSA2018-19 explains that due to a serious health condition, a non-exempt employee can take eight 15-minute rest breaks per workday as intermittent leave under the Family and Medical Leave Act. The employee works an eight-hour shift but, due to the breaks, is only performing six hours of work. The employer wants to know whether these breaks must be compensated under the Fair Labor Standards Act.

The Guidance

The letter recognizes that a rest break up to 20 minutes in length is ordinarily compensable under the FLSA because it primarily benefits the employer. In certain circumstances, however, courts have held that frequent accommodation breaks primarily benefit the employee and do not require compensation. With that in mind, the DOL opines that the employee is not due compensation for his or her rest breaks.

Lastly, the letter emphasizes that employees who take FMLA-protected breaks must also receive as many compensable rest breaks as their coworkers. So, if the employee’s coworkers receive two paid 15-minute breaks during an eight-hour shift, the employee is entitled to 10 breaks total, the first two paid and the remainder unpaid.

Takeaways

This opinion letter is an important reminder of the intersections between the various employment statutes. Depending on the employee’s serious health condition, issues under the Americans with Disabilities Act and the applicable state workers’ compensation statute could also come into play. Call your lawyer if you think you need help navigating your obligations under one statute in a way that won’t run afoul of another. And don’t forget that we can now ask DOL for an opinion letter.