DOL Releases New Opinion Letters: Varying Hourly Rates, the Ministerial Exception

The Department of Labor (DOL) has released two new opinion letters on the Fair Labor Standards Act (FLSA). Opinion letters respond to a specific wage-hour inquiry to the DOL from an employer or other entity, and represent the DOL’s official position on that particular issue. Other employers may then rely on these opinion letters as guidance.

FLSA2018-28: The DOL stated that a compensation plan that pays an average hourly rate varying from workweek to workweek complies with the FLSA, although it cautioned that there may be overtime concerns.

The FLSA requires employers to pay a minimum wage of at least $7.25 per hour (with some state and local laws setting higher rates) and an overtime premium for all hours worked over 40 in a workweek at 1½ times the regular wage rate. In the opinion letter, the employer’s home health aides receive weekly pay of an hourly pay rate times the hours spent with clients. This total amount is divided by the hours of client time plus travel time to calculate the average hourly rate for each workweek. The rate varies from workweek to workweek, but it always exceeds the required minimum wage. A typical average hourly rate is $10.00 per hour, and the overtime rate is based on a $10.00 hourly rate (i.e. $15.00 per hour), regardless of the actual hourly wage rate for the week.

The DOL found that, because the average hourly wage exceeds the minimum wage rate, the compensation plan complies with the FLSA. However, because the plan assumes a regular rate of pay based on $10.00 per hour, it would violate the FLSA when an employee’s actual rate of pay for the workweek exceeds $10.00 per hour. The DOL further noted that, if the employee’s actual hourly rate is less than $10.00, the plan is compliant with the FLSA since an employer can choose to pay an overtime premium that exceeds the statutory requirement.

FLSA2018-29: Members of a religious organization may not be employees within the meaning of the FLSA, where (1) they work “without promise or expectation of compensation, but solely for his personal purposes or pleasure,” and/or (2) are subject to the ministerial exception to the law.

Members of a religious community work in the community’s farms and gardens, schools, kitchens, laundries, medical care facilities, and non-profit ventures that generate income for the community. The DOL found that these services “do not fit any ‘traditional employment paradigm covered by the Act.’” Because the members do not work at a for-profit enterprise and do not expect to receive compensation in exchange for their work, they are not employees. According to the DOL, this is the case whether their motivation is religious or secular, “as long as they have chosen to donate their services free of coercion by the community.”

In addition, even if the members could be considered employees, they would be subject to the ministerial exception, under which “[p]ersons such as nuns, monks, priests, lay brothers, ministers, deacons, and other members of religious order who serve pursuant to their religious obligations in the schools, hospitals, and other institutions operated by their church or religious order shall not be considered to be ‘employees.’” The DOL notes that “[a]n entity may invoke the ministerial exception if its ‘mission is marked by clear or obvious religious characteristics.’”