Certain exemptions from employee rights to overtime premium pay require the employee to be paid on a salary basis or on a fee basis. On January 7, 2020, the U.S. Department of Labor (“DOL”) issued opinion letter FLSA2020-2 discussing a specific pay arrangement – where the total compensation is set by the scope of an assigned project, but the amount paid each week is a set amount. According to the DOL, these payments indicate a salaried employee (and exempt from overtime), so long as the payments do not change too often. The letter responds to the specific inquiry posed to the DOL, but the opinion informs payments generally for project-basis workers.
The DOL inquiry addresses an educational consultant hired to perform a specific project. The consultant was to receive a predetermined amount in 20 equal biweekly installments paid throughout the district’s academic year. The DOL found this qualifies as a salaried employee, assuming the educational consultant meets the duties tests of the administrative or professional exemptions and the weekly pay exceeds the salary threshold for those exemptions. The DOL’s opinion focuses on the pre-determined nature of the consultant’s weekly compensation. The weekly pay is the same regardless of actual hours spent and the quality of work performed during the week—the definition of a salary basis pay.
The DOL then considered whether additional compensation changes an employee’s pay status. For example, what if the same employee works, not only the agreed 40 weeks to develop the literacy curriculum, but also on a side project conducting teacher workshops over an eight week period? Because compensation in addition to the salary can be paid on any basis, such as a flat sum, bonus, or hourly amount, without undermining the salary basis test, the employee is still salaried if the employee receives an additional pre-determined amount for the side project in addition to their pay for the 40 week project.
The opinion letter specifically notes that an employee’s exempt status may be undermined, however, “if there are such frequent revisions to the contract that the amount of the employee’s biweekly compensation for a certain project is rarely the same from pay period to pay period and the circumstances suggest the amount of the payment is, in fact, actually based on the quantity or quality of work performed.”