Wage-hour opinion letters address tip pooling, emergency pay, and FLSA and FMLA compliance

On September 30, before the federal government shutdown, the Wage and Hour Division of the U.S. Department of Labor issued four opinion letters on issues of interest to employers.

All four of the letters were written by acting Wage Hour Administrator James R. Macy.

Tip pooling: Opinion Letter FLSA2025-03  

The employer requesting the opinion letter was a seafood restaurant with an oyster bar where front-of-house employees prepared freshly shucked oysters in the view of the customers.

Although servers and bartenders took orders, the shuckers interacted with patrons by explaining offerings, making suggestions, and answering questions. The employer asked whether these shuckers could be included with servers and bartenders in the tip pool. The WHD concluded that, due to their customer interaction, the front-of-house shuckers qualified as being in a “customarily and regularly tipped occupation.” Therefore, the employer could include them in a mandatory tip pool with other tipped employees.

The WHD compared them to itamae-sushi (tableside sushi) and teppanyaki chefs, who also receive tips due to their direct customer service. This was in contrast with oyster shuckers who worked exclusively in the kitchen with no customer interaction, and who therefore were not engaged in a “tipped occupation.”

The WHD noted that courts have recognized that “sufficient interaction with customers” and “whether the employee is engaged in customer service functions” are two important factors in helping courts determine whether an employee “customarily and regularly receives tips.” The opinion then noted that the DOL’s longstanding position is that counter persons who interact with and serve customers may participate in tip pools.

Tip for employers: If an employer uses a tip pool, the participants must be employees who “customarily and regularly receive tips.” In evaluating whether a particular employee “customarily and regularly receives tips,” employers should assess the employee’s level of interaction with customers and whether the employee is engaged in customer service. 

Emergency pay: Opinion Letter FLSA 2025-04

This Opinion Letter request came from a firefighter/paramedic employed by a city government in Texas. The city had a written policy providing premium “emergency pay” to firefighters and other non-exempt employees for each hour worked during an “emergency period.” The firefighter/paramedic believed this pay should be included in the regular rate used to calculate overtime. 

Generally speaking, the “regular rate” must include “all remuneration for employment paid to . . . the employee” for that work week. However, Section 7(e) of the Fair Labor Standards Act excludes eight types of payment from the regular rate, and the WHD said that Section 207(e)(3) was relevant to the firefighter/paramedic’s issue.

Section 207(e)(3) permits an employer to exclude from the regular rate “sums paid in recognition of services performed during a given period” if “both the fact that payment is to be made and the amount of the payment are determined at the sole discretion of the employer at or near the end of the period and not made pursuant to any prior contract, agreement, or promise causing the employee to expect such payments regularly.” 

The WHD determined that – regardless of whether the city’s policy would be a “prior contract, agreement, or promise,” the decision to pay “emergency pay” and the rate of pay were not at the “sole discretion of the employer.” 

Moreover, employee eligibility for, and the amount of the emergency pay, were determined well before the emergency work was performed, not at the end of the emergency period.

Accordingly, the WHD found that the “emergency pay” did not meet the requirements of Section 207(e)(3) and was not a discretionary bonus. As a result, it must be included in the regular rate for overtime calculations.

The opinion letter also looked at whether the emergency pay met the criteria of Sections 207(e)(5), (6), or (7) in the FLSA. These provisions exclude from the regular rate premiums paid by employers for work in excess or outside of specified daily or weekly periods or on certain special days. The DOL concluded

• That the emergency pay was not excludable under Section 207(e)(5) because it was not contingent upon the employee’s working in excess of any particular amount of hours.
• That the emergency pay was not excludable under Section 207(e)(6) because it was not contingent upon work being performed on “Saturdays, Sundays, holidays or regular days of rest or on the 6^th or 7^th day of the week.”
• That the emergency pay was not excludable under Section 207(e)(7) because, regardless of whether the city’s policy created an employment contract, the pay was not contingent upon the work’s having been performed outside the basic, normal, or regular workday or workweek.

SOS for employers: Interestingly, this opinion request and the one discussed below were submitted by employees rather than employers.  Because employees can request opinion letters, employers should be responsive to questions or complaints related to FLSA compliance.

Joint employers: Opinion Letter FLSA2025-05

A hostess at a hotel restaurant requested an opinion letter after being offered shifts at the hotel's Members Only Club, which operated in the hotel but was run by a different company. She was told that she wouldn’t receive overtime for working more 40 hours in both jobs because the two entities were “different companies.”

The opinion letter noted that, generally, affiliated entities are sufficiently integrated to be joint employers under the FLSA if they have related employment relationships with the same employees. This can occur where, among other situations, “there is an arrangement between the employers to share an employee’s services, as for example, to interchange employees.”

The WHD concluded that the restaurant and the Members Only Club were “horizontal” joint employers under the FLSA, finding that the hotel restaurant and the Members Only Club were sufficiently associated with each other with respect to the employment of the hostess.

Significant factors pointing toward joint employment included the following:

• Integrated Operations. The restaurant and club were in the same hotel, shared a single kitchen, and offered substantially the same food and beverages.
• Common Control/Staff. The facilities apparently had the same owners, had some managers who periodically supervised and managed both facilities, and frequently shared employees.
• Staff Interchange and Rate of Pay: Employees would clock in at one facility and could be directed to work in the other at the same rate of pay, indicating sufficient association.

For employers: Putting two and two together. The restaurant and the Members Only Club may have been separate legal entities, but corporate formalities do not necessarily control. Horizontal joint employment will be found where employers are involved in similar operational relationships, and where control, ownership, and staff are shared. In such situations, all hours worked by the employee at both facilities must be combined. If the aggregated hours exceed 40, the employee must be paid an overtime premium, and both employers are jointly and severally liable for any wage and penalty obligations.

FMLA: Opinion Letter FMLA2025-02-A

This Opinion Letter addressed how to calculate the number of hours of Family and Medical Leave available to correctional law enforcement employees on a fixed “Pitman Schedule.” A Pitman Schedule requires 12-hour shifts over a two-week cycle, totaling 84 mandatory hours every two weeks, including mandatory overtime. Employees may also volunteer for additional hours outside the fixed schedule.

The employer reported to the WHD that it converted the 12-hour workweek entitlement under the Family and Medical Leave Act to 504 hours, based on the mandatory 84 hours every 14 days, and excluded voluntary hours from both entitlement and leave usage. The employer asked whether this method of computing FMLA leave was acceptable. The WHD said that the employer’s approach was consistent with FMLA regulations, which require an employee’s leave entitlement to be based on his or her actual, normally scheduled, workweek.

We’ll leave you with this: FMLA leave for Pitman schedule employees should be handled as follows:

• Calculating employee’s leave allotment. Employers must include all normally scheduled hours, including mandatory overtime, in calculating the employee’s FMLA leave allotment. For an employee on a Pitman schedule, converting 12 workweeks to 504 hours is correct. Voluntary overtime hours are excluded.
• Calculating employee’s leave usage. When an employee takes FMLA leave, all hours the employee would normally have been required to work during the period of leave, including mandatory overtime, should be counted against the employee’s leave allotment. Voluntary overtime is not deducted, and employers cannot require employees to use FMLA leave for those hours.

About opinion letters

Opinion Letters have two forms of legal significance: First, under the Portal-to-Portal Act of 1947, they provide a defense to back wage claims if the recipient relied on the letter in good faith, even if the letter isn’t given legal deference by the courts. Second, others may use the letter to illustrate the WHD’s reasoning on a similar issue, even if the others did not request the letter and were not directly involved in the issue addressed by the letter.

In June, Deputy Secretary of Labor Keith Sonderling launched an Opinion Letter Program across five agencies within the U.S. Department of Labor, including the Wage and Hour Division. Mr. Sonderling was quoted in a press release saying, “Opinion letters are an important tool in ensuring workers and businesses alike have access to clear, practical guidance. Launching this program is part of our broader effort to empower the public with the information they need to understand and comply with the laws the department enforces.”

If you have a question about a wage and hour matter, please contact any member of Constangy’s Wage and Hour Compliance & Litigation Practice Group. For FMLA-related guidance, please contact any of our employment law attorneys.