Back in January, we reported that the Department of Labor’s Wage and Hour Division (WHD) was reviving the agency’s practice of issuing opinion letters at the request of employers. The WHD stopped the practice of issuing opinion letters under the Obama administration back in 2010. After nearly a decade, the WHD finally issued new opinion letters on April 12. Below we will discuss two of the letters.
In one letter, an employer asked whether certain lump-sum payments from employers to employees are earnings subject to garnishment for child support under the federal Consumer Credit Protection Act (CCPA). The WHD analyzed 18 examples of the most common types of lump-sum payments made by employers to employees, under the general assumption that lump-sum payments to employees for services performed should be garnished under the CCPA. Using that premise, the agency determined that the following 15 payment examples should be garnished: commissions; discretionary and nondiscretionary bonuses; productivity or performance bonuses; profit-sharing, referral or sign-on bonuses; moving or relocation incentive payments; attendance awards; safety awards; cash service awards; retroactive merit increases; payments for working during a holiday; termination pay; and severance pay.
The WHD also determined that portions of payments for worker’s compensation and insurance settlements may (and likely do) qualify as payments for garnishment, while other portions may not. Any portion designed to replace wages that would have been earned but for the work-related injury or attributable to back or front pay are subject to garnishment, but portions attributable to compensatory or punitive damages are not.
Out of the 18 examples, the agency determined that only buybacks of company share payments are not subject to garnishment. The general theme was that in determining whether lump-sum payments are subject to garnishment, the central focus is whether the payment is made or related to personal services performed.
In the second letter, the employer inquired whether it was required to pay for 15-minute hourly breaks directed by a doctor and protected under the Family Medical Leave Act (FMLA). Due to the breaks, the employee would only work six hours out of an eight-hour workday.
The agency noted that an employee may take FMLA leave in periods of weeks, days, hours or even less than an hour, and that the leave may be unpaid unless the employee substitutes available paid leave for the FMLA leave. Since FMLA leave may be unpaid, the issue then becomes whether the short FMLA breaks every hour are compensable time. The agency recognized that short breaks up to 20 minutes are generally compensable because the breaks primarily benefit the employer (i.e., employer gets a re-energized employee). The agency, however, determined that the 15-minute hourly FMLA breaks are to accommodate the employee’s serious health condition. Therefore, the breaks primarily benefit the employee (not the employer), and thus need not be paid. With that said, the agency noted the caveat that if the employer by policy or practice provides for a certain number of paid breaks, employees taking health-related breaks must also be provided the same number of paid breaks. For example, if the employer provides two 15-minute paid rest breaks in an eight-hour workday, an employee needing 15-minute breaks every hour for health-related reasons must also be compensated for two 15-minute breaks during the eight-hour work day.