Paul DeCamp Quoted in “Car Sales Incentives Count Toward Minimum Wage, DOL Says”Law360 June 25, 2020
Paul DeCamp, Member of the Firm in the Employment, Labor & Workforce Management practice, in the firm’s Washington, DC office, was quoted in Law360, in “Car Sales Incentives Count Toward Minimum Wage, DOL Says,” by Jon Steingart. (Read the full version – subscription required.)
Following is an excerpt:
Car dealerships can use incentive payments from automakers to help meet their obligation to pay salespeople minimum wage, and workers who sell merchandise out of mobile trucks don’t need to be paid minimum wage at all, the U.S. Department of Labor said in a quintet of opinion letters released Thursday.
Responding to a query from several car dealerships, the DOL addressed how dealers’ obligation to pay their employees is affected by “incentive payments” that manufacturers pay to boost sales pay under the Fair Labor Standards Act if the dealer and its employees agree to count third-party payments as wages.
“Given these facts, the incentive payments will be considered part of the employment agreement and count toward minimum wage obligations by the employing automobile dealership,” Stanton said. The DOL relied on the U.S. Court of Appeals for the Third Circuit’s recent decision in Secretary U.S. Dep’t of Labor v. Bristol Excavating Inc., which sided with the DOL’s view that bonuses paid by a third party shouldn’t be factored in when calculating someone’s regular and overtime rates.
Automakers’ payments to dealers’ employees are similar to tips customers give to servers and bartenders, said Cheryl M. Stanton, administrator of the department’s Wage and Hour Division. The FLSA lets restaurants count tips as wages, reducing the amount that the business must pay as long as hourly wages plus tips meet minimum wage. This has the effect of reducing the amount the house must pay a tipped employee from $7.25 to as little as $2.13 per hour.
“But this does not mean that all payments from a third party are wages under the FLSA,” Stanton said. “Whether a payment from a third party constitutes wages depends on the terms of the employment agreement, express or implied, and compliance with the other requirements of the FLSA.”
Opinion letters are valuable to the businesses that request them because they provide immunity from liability if workers file a lawsuit alleging the circumstances described in the letter violate the FLSA. Other businesses facing similar situations can also assert a letter as a defense, although the bar is higher. The Labor Department didn’t disclose who requested the letters because the FLSA requires it to keep their identities confidential.
Paul DeCamp, a member of Epstein Becker Green who represents employers in wage and hour matters and served as Wage and Hour Division administrator in the George W. Bush administration, said the agency’s position “is actually very much consistent with how the agency has viewed these payments over the years.”
“About 15 years ago, WHD faced the related question of whether payments by third parties affect an employee’s regular rate, thus requiring inclusion in the overtime calculation,” DeCamp told Law360 in an email. “WHD concluded then that these payments are, in effect, wages, and an employer must therefore include that money in the regular rate,” he said, referring to a 2005 opinion letter.
“Now, WHD has looked at the matter from a different angle: whether those payments are wages for purposes of minimum wage,” DeCamp continued. “WHD’s answer was the same: these payments are wages under the FLSA, and thus they count toward satisfying the employer’s minimum wage obligation.”