These opinion letters come as part of the department’s initiative to expand its opinion letter program, as announced in June 2025.
On January 5, 2026, the U.S. Department of Labor, through its Wage and Hour Division (WHD), issued four opinion letters aimed at enhancing clarity, consistency and transparency in the application of federal labor standards under the Fair Labor Standards Act (FLSA). These opinion letters come as part of the department’s initiative to expand its opinion letter program, as announced in June 2025. The four opinion letters address: (1) employer discretion to classify employees as nonexempt when an FLSA exemption otherwise applies; (2) when bonuses tied to predetermined criteria must be included in the regular rate of pay and trigger overtime recalculations; (3) whether mandatory pre-shift activities constitute compensable time notwithstanding collective bargaining agreements; and (4) the application of the FLSA’s commission exemption to higher state minimum wages and tipped employees.
Classification of Learned Professionals as Nonexempt Employees
FLSA2026-1 examined the reclassification of a licensed clinical social worker employed by a healthcare organization from exempt under the FLSA Section 13(a)(1) (29 U.S.C. § 213(a)(1)) “learned professional” exemption to nonexempt. The employee’s role involved making clinical assessments and psychological evaluations, planning treatments, participating in interdisciplinary care teams, along with supervisory responsibilities and required possession of a professional license and master’s degree. Following an internal restructuring, the employer advised that the employee would be reclassified from exempt to nonexempt on the basis that the employee would no longer be performing supervisory responsibilities.
To be exempt under the learned professional exemption, an employee’s primary duty involved the performance of “work requiring advanced knowledge … in a field of science or learning” which is “customarily acquired by a prolonged course of specialized intellectual instruction.” 29 C.F.R. § 541.301(a).
The WHD concluded that, although the discontinuation of supervisory responsibilities would not by itself preclude the classification of the employee as an exempt learned professional, it was the change from being paid on a salary basis to being paid on an hourly basis that would likely defeat the exemption. The WHD observed that the FLSA does not require employers to classify qualified employees as exempt. Instead, even if an employee meets all of the criteria for an FLSA exemption, the employer may still elect to classify the employee as nonexempt, as long as the employee receives the federal minimum wage for all hours worked and overtime for any hours over 40 in a workweek. The FLSA only prohibits the misclassification of nonexempt employees as exempt.
Effect of Bonuses on Regular Rates of Pay and Overtime
Next, the WHD evaluated the proper inclusion of nondiscretionary bonuses in an employee’s regular rate of pay and how to include these payments in overtime calculations in FLSA2026-2.
The opinion letter analyzed a pay plan for waste management drivers in which employees received a base hourly rate plus incentive compensation under a bonus plan tied to safety, job duties and job performance. Once employees satisfy predetermined criteria, the amount of the bonus was automatically earned by the employee for all hours worked in that pay period.
The WHD was asked to review whether the employer could exclude these bonus payments from the regular rate of pay—and if not, how it must include these payments in the calculation of overtime pay. The WHD determined that the bonus payments in question must be included in the regular rate because they were incentive payments and not discretionary bonuses.
Section 7(e)(3) of the FLSA (29 U.S.C. § 207(e)(3)) requires that to be excludable, a discretionary bonus must satisfy three conditions: (1) it must be determined at the employer’s “sole discretion”; (2) the employer’s determination must occur “at or near the end of the period” of the measurement period; and (3) the bonus must not be promised in advance. 29 U.S.C. § 207(e)(3).
Here, the fact that the bonus payments were automatically triggered upon meeting certain predetermined criteria made them incentive payments. The opinion letter delivers an important reminder for employers to review their bonus programs to ensure compliance with the FLSA.
Compensability of Mandatory Pre-Shift Roll-Call Times
In FLSA2026-3, the WHD considered whether a union and employer of emergency dispatch workers can enter into a collective bargaining agreement (CBA) that mandates a 15-minute “roll call” prior to each scheduled shift but excludes that time when calculating overtime premiums under the FLSA.
The request originated from the chairman of a union representing county 911 dispatchers working fixed eight‑hour shifts on a “four days on, two days off” cycle, equating to 32 hours per six‑day period and an annual total below 2,080 hours. The union and county considered a CBA proposal mandating a 15‑minute roll call prior to each scheduled shift that would be considered “hours worked” to bring annual hours closer to 2,080 while excluding that time from the overtime calculation.
The requester posed three questions:
- Whether the mandatory 15-minutes of roll-call time is “hours worked” under the FLSA;
- Whether the roll-call time can be used to supplement short pay periods; and
- Whether it can be excluded from the overtime calculation because its purpose is to reach 2,080 annual hours.
The WHD concluded that roll-call time is compensable hours worked that must be counted toward the weekly total for minimum wage and overtime purposes. First, the WHD noted that, “in general, all time an employee is required to be on duty, on the employer’s premises, or at a prescribed workplace is considered hours worked.” 29 C.F.R. § 778.223(a). Although certain activities that take place prior to the workday may be excepted from hours worked, these preliminary activities can nonetheless be made compensable by contract, custom or practice. Here, the WHD concluded that because the CBA provision would consider the mandatory roll-call time “hours worked,” it would make that time compensable by contract. Therefore, the roll-call time must also be counted as part of the workweek of each employee in attendance, regardless of the number of hours each employee works in that workweek.
However, the WHD noted that, under certain circumstances, employers and unions may structure CBAs to fall within with the partial overtime exemptions for workers in bona fide CBAs under Sections 7(b)(1) and 7(b)(2) of the FLSA (29 U.S.C. § 207(b)(1) and (2)). Both Section 7(b)(1) and Section 7(b)(2) require that the employee be employed pursuant to a CBA between the employer and a “bona fide” union that is certified by the NLRB, and the employer must pay the employee overtime premiums for all hours worked over 12 in a day or over 56 in a workweek.
Under Section 7(b)(1), the CBA must state that the employee will not work more than 1,040 hours in any consecutive 26-week period. 29 U.S.C. § 207(b)(1).
Under Section 7(b)(2), the CBA must: (1) specify pay rates; (2) guarantee during a defined 52‑week period at least 1,840 hours or 46 normal workweeks of at least 30 hours, and cap guaranteed hours at no more than 2,080; (3) ensure no more than 2,240 hours are worked in that period; and (4) pay overtime wages for all hours worked over the guaranteed number of hours that are also over 40 in a given workweek and for all hours worked over 2,080 in the defined 52-week period. Id. § 207(b)(2).
The opinion letter provides an important reminder that employers cannot contract away the legal obligations imposed by the FLSA, with guidance on the compensability of preliminary and postliminary shift activities. However, well-crafted CBAs may be structured to comply with the partial overtime exemptions of FLSA Sections 7(b)(1) and 7(b)(2).
Federal Floor Governs Minimum Pay Standard and Limited Role for Tips in Commission Calculations
In the final FLSA opinion letter, FLSA2026-4, the WHD clarified two issues under the “commission” exemption from the overtime pay requirement of FLSA Section 207(a)(1) set forth in Section 7(i) of the FLSA (29 U.S.C. §§ 207(a)(1), 207(i)).
The opinion stated (1) an employee of a qualifying retail or service establishment paid more than one and one-half times the federal minimum wage, not a higher state or local minimum wage, satisfies the minimum pay standard in Section 7(i)(1), and (2) although tips are not commissions under Section 7(i), in some circumstances, a portion of an employee’s tips would be compensation for purposes of determining whether an employee is primarily paid by commission under Section 7(i)(2).
The FLSA exempts from its overtime pay requirements certain employees of “retail or service establishment[s].” 29 U.S.C. § 207(i). The exemption applies to any employee of a retail or service establishment 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 percent commissions. Id.
The opinion letter provides clarity on two key compliance question for employers in retail or service sectors. First, the minimum pay test is governed by the federal floor for 7(i) purposes, not any higher applicable state or local minimum wage, thereby minimizing confusion and encouraging consistent application across jurisdictions. As a result, an employee’s regular rate must exceed $10.875 per hour at present ($7.25 × 1.5), for each workweek in which the exemption is claimed. Second, tips are considered “compensation” for purposes of Section 7(i)(2) only to the extent that an employer relies on them to meet a federal, state or other wage obligation to the employee.
Although courts are not bound by these opinion letters, they provide guidance from the WHD on complex issues and ambiguity in the law, making them a useful tool for employers to evaluate and improve compliance in an area where the penalties for violations tend to be significant.
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