In accordance with its promise to provide additional guidance regarding wage and hour issues, which we previously reported, on January 5, 2026, the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD) issued a collection of opinion letters that provide guidance on several issues under the Fair Labor Standards Act (FLSA). A brief discussion of the four new letters follows.
FLSA2026-1 - Issue: May an employee whose supervisory duties are discontinued still meet the criteria for the “learned professional” exemption and, if so, may the employer nevertheless pay the employee on an hourly basis and reclassify the employee as non-exempt?
- A licensed clinical social worker for a healthcare organization was originally classified as “salaried (exempt),” but the employer discontinued the employee’s supervisory duties and reclassified the employee as “hourly (non-exempt).”
- The WHD opined that, even after the change in job duties, the employee still likely satisfied the primary duties requirements of the FLSA’s “learned professional” exemption at 29 C.F.R. Part 541, Subpart D. However, because the employee was no longer paid on a salary basis as outlined in 29 C.F.R. Part 541, Subpart G, the employee did not satisfy all of the requirements for the exemption.
- According to the WHD, employers have the discretion to classify an employee as non-exempt and pay them on an hourly basis (including overtime) even if the employee satisfies the duties test of a particular exemption.
FLSA2026-2 - Issue: Does Section 7(e) of the FLSA permit an employer to exclude certain bonus payments from the “regular rate of pay” and, if not, how must the employer include these payments in the calculation of employee overtime premiums?
- Hourly/non-exempt waste management drivers were paid an hourly rate of $12/hour. Drivers were also eligible for supplemental performance-based bonuses each pay period. The employer used established, detailed criteria and one or more formulas to determine whether the bonus was earned and, if so, to calculate the hourly bonus amount. Criteria included an employee’s punctuality, attendance, consistency in completing daily safety tasks, driving safety, compliance with traffic laws, proper attire, and performance efficiency.
- The employer did not include these bonuses in the drivers’ regular rate for purposes of calculating overtime premiums.
- The WHD opined that the employer must include the bonus payments in the regular rate of pay for every workweek in which the bonuses were earned because the bonuses were not discretionary—given that the employer calculated them using a predetermined plan to incentivize certain work performance—and did not otherwise fit within any of the other exceptions set forth in 29 U.S.C. § 207(e)(1)-(8).
FLSA2026-3 - Issue: Can a union and employer enter into a CBA that mandates a 15-minute “roll call” prior to each scheduled shift, but exclude that time when calculating overtime premiums under the FLSA?
- Emergency dispatch workers were subject to a collective bargaining agreement (CBA). The employer and union proposed adding a mandatory 15-minute roll call prior to each scheduled shift that, while paid, would not be counted towards the employees’ weekly hours for purposes of calculating overtime.
- The WHD concluded, in part, that the mandatory roll call would constitute “hours worked” under the FLSA, which includes all time an employee is required to be on duty, on the employer’s premises, or at a prescribed workplace. 29 C.F.R. § 778.223(a). Because such time constitutes “hours worked,” it cannot be excluded from employees’ weekly hours for purposes of determining entitlement to, or the calculation of, overtime pay owed for a given workweek.
- The WHD noted, however, that the proposal in question could theoretically be structured to qualify for partial overtime exemptions applicable to employees who work pursuant to CBAs between an employer and a “bona fide” union, provided that other conditions specified under 29 U.S.C. § 7(b)(1)-(2) are satisfied.
FLSA2026-4 – Issue (1): In a jurisdiction where the state minimum wage exceeds the federal minimum wage, must an employer use the federal minimum wage or the higher state minimum wage to determine whether it has satisfied the minimum pay standard in Section 7(i)(1) of the FLSA?
- An employer operated restaurants in a state with its own tip credit rules and a minimum hourly wage that is higher that the federal minimum wage. The restaurants classified their “servers and server assistants” as exempt from overtime under the retail/service establishment exemption in 29 U.S.C. § 207(i).
- These employees received commissions (likely from qualifying service charges) and tips (which are not commissions under Section 7(i) but, in some circumstances, may be considered compensation for determining whether an employee is primarily paid by commissions under Section 7(i)(2)).
- The WHD noted that the FLSA exempts from its overtime pay requirements certain employees of “retail or service establishment[s]” whose (1) regular rate of pay exceeds one and one-half times the federal minimum wage, and (2) compensation for a representative period is composed of more than 50% commissions. Id.
- The WHD opined that, under the plain text of Section 7(i)(1), the exemption only requires that the employee’s regular rate exceed one and one-half times the federal minimum wage (i.e., $10.88/hour or higher)—not any applicable higher state minimum wage.
Issue (2) - Are tips considered “compensation” for purposes of determining whether more than half of an employee’s total compensation in a representative period consist of commissions under Section 7(i)(2)?
- According to the WHD, “compensation” under Section 7(i)(2) means compensation for employment. See 29 C.F.R. § 779.415(a). Because tips are within the discretion of the customer, they are generally not considered compensation paid by the employer for employment.
- The WHD clarified that in certain cases, however, the FLSA permits an employer to take a “tip credit” for the difference between the employee’s base hourly wage and the federal minimum wage, provided that the employee’s tips make up the difference. Because this “tip credit” is part of an employee’s guaranteed earnings under applicable law, these tips are paid by the employer for employment and should be included in an employee’s “compensation” for purposes of Section 7(i)(2).
- The WHD, thus concluded that tips are “compensation” for purposes of Section 7(i)(2) but “only to the extent that an employer, in fact, relies on them to meet a federal, state, or other wage obligation with respect to the employee.” Any additional amount of tips the employee receives need not be counted when determining “whether more than half of an employee’s compensation’ for a representative period represents commissions” under Section 7(i).
We expect to see additional guidance from the DOL as the year progresses and will continue to monitor any developments as they arise.
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