Seyfarth Synopsis: The Fifth Circuit recently confirmed that a hybrid compensation arrangement (combining a fixed salary with variable day-rate pay) can qualify as “salary basis” under the Fair Labor Standards Act (“FLSA”). This decision reaffirms that, if done properly, employers can satisfy the salary basis test even when variable pay makes up the bulk of an employee’s total compensation.

Several years ago, the Supreme Court considered whether a day-rate employee earning almost $1,000 a day was paid on a “salary basis” under the FLSA. In concluding that he was not, the Supreme Court considered how the employee’s pay was calculated, not merely the frequency of distribution. Recently, the Fifth Circuit issued an important decision clarifying how employers can meet the salary basis test. The Fifth Circuit held that, if an employer calculates a guaranteed salary on a weekly (or less frequent) basis, the employer can provide additional compensation without meeting the reasonable relationship test and without losing the salary basis.

Case Background

In Guilbeau v. Schlumberger Tech. Corp., the employer, Schlumberger, paid a portion of its oilfield employees under a hybrid compensation model, comprising of a fixed, predetermined biweekly salary plus variable day rates based on days the employees actually worked. The employees sued under the FLSA claiming they were owed overtime pay. Their core argument was that, because so much of their total compensation fluctuated with days worked, they were effectively day-rate—not salaried—employees, and therefore ineligible for the FLSA’s highly compensated employee (“HCE”) overtime exemption. The district court agreed and denied summary judgment for Schlumberger, but the Fifth Circuit reversed.

To qualify for the HCE exemption, as well as other “white collar” exemptions, an employer must prove that its employees are paid on a “salary basis.” There are two regulatory pathways:

  • 29 C.F.R. § 541.602(a) (“Section 602(a)”) governs employees with a guaranteed, predetermined weekly (or less frequent) salary that does not vary with hours or days worked. This pathway has no cap on the ratio of total pay to guaranteed pay.
  • 29 C.F.R. § 541.604(b) (“Section 604(b)”) governs employees whose compensation is fundamentally computed on a daily or hourly basis. This pathway imposes a “reasonable relationship” test, which is more restrictive and requires that the employee’s total pay generally not exceed 1.5 times the guaranteed amount.

The stakes were high. If Section 604(b) applied, Schlumberger would lose because the ratio of total pay to guaranteed pay was 5.9-to-1—far exceeding the 1.5-to-1 ceiling. Conversely, Schlumberger would win if Section 602(a) applied, which does not have a ratio cap.

The Decision

The Fifth Circuit held that Section 602(a) governs. The analysis was straightforward: Because Schlumberger’s employees received a genuine, predetermined salary (i.e., paid on a biweekly basis, without any reductions for quality or quantity of work), the threshold requirements of Section 602(a) were satisfied. The fact that employees also received substantial variable day-rate pay on top of that salary was immaterial. The Court further explained that another regulation—29 C.F.R. § 541.604(a)—supports this outcome by expressly stating that employers may provide “additional compensation without losing the exemption or violating the salary basis requirement” so long as the employer guarantees at least the minimum weekly-required amount paid on a salary basis. Accordingly, the Court emphasized that the analysis turns on the nature of the guaranteed salary—not the nature of the variable pay stacked on top of it. Pointing to its own recent decisions, as well as consistent decisions from the Third, Tenth, and Eleventh Circuits, the Court reaffirmed that a genuine non-deductible salary anchors the inquiry and that additional day-rate compensation does not disturb the exemption’s applicability.

The Fifth Circuit distinguished its decision in Gentry v. Hamilton-Ryker IT Sols., LLC. There, the plaintiffs’ guaranteed pay was equal to eight hours of wages. The Gentry court explained that, although guaranteed, the pay was nonetheless based on an hourly computation. Therefore, the court held that Section 604(b) and its reasonable relationship test applied. In contrast, Schlumberger calculated the guaranteed pay on a biweekly basis, so Section 602(a) applied. The Fifth Circuit’s decision emphasizes the technical nature of the regulations, and the importance of ensuring that the guaranteed salary actually be calculated on a weekly or less frequent basis, not merely paid by the week.

Employer Considerations

Following the Fifth Circuit’s decision, employers should consider the following points:

  1. Hybrid pay structures can work, but the salary must be genuine. The Court’s holding confirms what most wage-and-hour practitioners have long known: variable day-rate pay, even when it dominates total compensation, does not undermine an otherwise valid salary-basis arrangement. However, this decision emphasizes that the guaranteed component must be a true, predetermined salary and not a thinly disguised hourly backstop.
  2. Document the salary component carefully. Offer letters, employment agreements, and payroll records should clearly reflect the fixed nature of the guaranteed salary and how the salary is calculated. Ambiguity about pay structure invites litigation.
  3. Monitor regulatory thresholds. The HCE exemption’s minimum compensation thresholds are subject to change. Employers should ensure their compensation structures remain compliant as those thresholds evolve.

By: Phillip J. Ebsworth and Natalie C. Kreeger

Seyfarth Synopsis: The Fourth Appellate District affirmed the trial court’s broad discretion to reduce PAGA civil penalties, holding that courts may use “any reasonable method” to reduce penalties and are not bound by any single calculation method — whether per pay period, per employee, or otherwise — and upheld the application of a 0.70 multiplier to the lodestar attorney fee amount when calculating a fee award.

In Taduran, the plaintiff brought a PAGA action against his former employer alleging overtime wage, rest period, wage statement, and recordkeeping violations under the Labor Code. Liability was established through summary adjudication and stipulation on all four claims, leaving the amount of civil penalties as the sole triable issue. Plaintiff argued penalties totaled approximately $55.9 million at the statutory maximum, while Defendant urged significant reductions based on the technical nature of the violations and minimal harm. The trial court awarded $515,965 in total civil penalties (i.e. <1% of requested penalties) and applied a modifier of 0.70 to the lodestar, awarding $733,440 in attorney fees against the approximately $1.57 million sought based on a requested 1.5 multiplier.

The Fourth District held that Labor Code section 2699, subdivision (e)(2) authorizes a court to award a “lesser amount” than the maximum civil penalty where, based on the facts and circumstances of the case, the maximum award would be “unjust, arbitrary and oppressive, or confiscatory.” The court rejected Plaintiff’s argument that reductions must be applied on a per pay period basis, finding that trial courts retain full discretion to use “any reasonable method” — including a percentage, per pay period, or per employee basis. On attorney fees, the court upheld the 0.70 negative multiplier, finding the trial court properly considered the straightforward nature of the claims and the significant disparity between the amount sought and recovered. The court noted that in representative actions such as PAGA claims, the percentage of recovery relative to the amount sought may properly support a negative multiplier.

The decision serves as an important reminder for employers that trial courts have broad flexibility in fashioning PAGA penalty reductions without being locked into any single methodology and that attorney fee awards will consider the nature of the claims and any disparity between the amount sought and recovered.

By: Christina Jaremus, Alex Simon, and Noah Finkel

Seyfarth Synopsis: The Fourth Circuit tapped back in right where it left off in its late 2024 decision in Stafford v. Bojangles’ Restaurants, Inc. There, it reversed class certification in a wage-and-hour class action involving shift managers at the southern-style fast-food chain who alleged they were required to perform various off-the-clock tasks (Seyfarth’s analysis of Bojangles is available here). On June 15, 2026, in Overby v. Anheuser-Busch, LLC, the Fourth Circuit doubled down on its skepticism of overbroad wage-and-hour classes, vacating a Rule 23 class of brewery workers alleging unpaid pre- and post-shift work.  The Fourth Circuit’s message is familiar but sharper: high-level “common questions” and sweeping class definitions won’t survive where the underlying work realities vary.

The Setup: A “Uniform Policy” Case—On Paper

Plaintiffs—hourly employees at an Anheuser-Busch brewery—claimed the company failed to pay for pre- and post-shift work, including the donning and doffing of personal protective equipment, securing and putting away tools, COVID screening (for a time), and shift change meetings.

They pointed to the company’s policy of generally paying employees only for scheduled shift hours as well as mandatory health and safety requirements in effect during the COVID-19 pandemic until February 2022. Plaintiffs pursued state-law Rule 23 claims under the Virginia Wage Payment Act and Virginia Overtime Wage Act alongside an FLSA collective. The district court certified a sweeping class of all non-exempt employees at the Williamsburg brewery during the relevant time period. Plaintiffs argued this was all driven by a uniform compensation practice, in their view, a single brewing process applied across the workforce. The district court framed the common question at a high level: whether Anheuser-Busch failed to pay for mandatory pre- and post-shift work in violation of Virginia law. But the Fourth Circuit found that theory… a bit over-carbonated and ultimately tough to swallow.

The Holding: Flat Beer for the Plaintiffs’ Class Theory; Certification Vacated (and Bojangles Reinforced)

The Fourth Circuit vacated the class certification order, holding that the district court misapplied Rule 23’s commonality and predominance requirements by:

  • Defining the common question “at too high a level”;
  • Ignoring “substantial variance” across employees; and
  • Certifying an overbroad, effectively circular class.

The opinion repeatedly invokes Bojangles, emphasizing that generalized policy-based theories cannot paper over workplace variability. “Relying solely on overly generalized company policies will typically defeat class-action certification because these formulations too often disguise the dissimilarity of prospective class members.  The present case epitomizes this exact trap. In defining the common question at too high a level, the district court failed to observe the myriad variations in employees’ circumstances.” In short, the plaintiffs’ theory might have looked cohesive at first pour—but it couldn’t withstand a closer inspection.

Key Reasoning: Why This Class Went Flat

1. “Common Question” Framed Too Abstractly

The district court asked whether Anheuser-Busch failed to pay for required off-shift work. But the Fourth Circuit found that question functionally circular—it assumes what must be proven. Writing for the Court, Judge Wilkinson labeled this kind of high-altitude framing “semantic gerrymandering”: “One can always frame a question in such an abstract manner as to elicit a common response. But such semantic gerrymandering does not reflect the duties and obligations inherent in Rule 23.”

In an important doctrinal note, the panel reiterated that “commonality is a subfactor of predominance.” As applied here, answering the certified common question would have required the district court to first make individualized determinations, e.g., did the employee actually perform pre- or post-shift work at all?  Was it required by the company?  Did it occur outside the shift?  

As the panel put it, “These questions have no common answer; they involve more particularized engagement with the record and reveal significant variation amongst prospective class members”—not exactly a recipe for a classwide keg.

2. The Record Was Fermenting with Variability

The court identified what it called “three different flavors” of variation that skunked predominance, including:

  • Whether tasks were performed at all. Not all employees attended shift change meetings or performed the same duties. Not all employees worked during the period in which the company mandated COVID-19 health policies.
  • Where/when tasks occurred.  Did the employee don and doff protective equipment at home, on-site, or during the shift? The Fourth Circuit noted that putting on work boots before leaving the house generally isn’t compensable, and that some donning and shift change meetings occurred during shift hours — meaning Anheuser-Busch had already paid for them.
  • Differences across roles and departments.  PPE requirements and practices and job duties varied by position.

This variability meant liability would devolve into employee-by-employee mini-trials and was not suited for a clean classwide pour or even a consistent flight.

3. Legal Variability (Often Overlooked)

Adding another wrinkle, the governing law wasn’t consistent across the class. Specifically, Virginia’s overtime law materially changed in July 2022. Due to the relevant lookback period, some workers were subject to pre-amendment law, others post-amendment, and some both. That alone required individualized legal analysis before even reaching liability. So even if the facts aligned (they didn’t), the legal framework didn’t.  That’s not a single brew—it’s multiple recipes on entirely different taps.

4. Overbroad (and “Circular”) Class Definition

The certified class “effectively encompasses all hourly employees at the brewery, with no caveat whatsoever,” regardless of whether they performed any uncompensated work, were subject to the same policies, and/or were subject to the same legal standards. The Fourth Circuit called this out as a “circular class definition” that presumes liability and masks differences, a label that promises more than what’s actually in the glass.

5. Damages Couldn’t Save It

Although individualized damages issues alone do not defeat certification, the court made clear that common liability must be established before reaching the damages phase. Statistical proof (a Tyson Foods approach) only works where underlying conduct is sufficiently uniform.

A Notable Side Pour: FLSA Collective Untouched

The Fourth Circuit dismissed the appeal as to the FLSA collective decertification issue, declining to extend Rule 23(f) review to that question. That leaves a familiar tension in that the Rule 23 class did not hold up, but the collective action under the FLSA remains on tap and still flowing, at least for now.

Practical Takeaways: What Employers Should Tap Into

Bojangles Is Now Fully on Draft. First the chicken, now the beer: Overby confirms that Bojangles is not a one-off. The Fourth Circuit is actively policing overgeneralized “policy” theories, abstract common questions, and failure to grapple with record-level variability.

Let the Variability Ferment. Even where a company has centralized pay practices, shared onboarding, or safety requirements, those facts alone won’t carry certification if actual work practices diverge. The winning strategy (again) centered on evidence that employees differed in tasks performed, timing and location of work, and job duties and departments. Employers should expect courts to demand this granular showing at the class certification stage. Employers also are well-advised not to overlook legal variability. Changes in statutes, regulations, and time periods relevant to a law can also independently defeat predominance even if the facts were uniform (although they were not in Overby).

Class Definitions Need to Be Crisp, Not Cloudy. Hazy, sweeping class definitions that track liability theories and include workers who have no plausible claim will draw scrutiny as “circular” and overbroad.  The court floated subclasses as a potential path forward—but emphasized that each subclass must independently satisfy Rule 23.

Bottom Line: Bojangles fired up the kettle, and Overby kept the wort boiling. The Fourth Circuit is sending a consistent signal: Rule 23 certification in wage-and-hour cases requires more than a shared theory of underpayment—it demands genuinely common proof. Where liability hinges on who did what, when, and under which rules, the class action model starts to lose its kick and may go flat before it ever reaches the bar.

By: Kyle D. Winnick and Andrew Simon

Seyfarth Synopsis: The District of New Jersey held that performers on a streaming platform are employees under New Jersey law despite being independent contractors under the Fair Labor Standards Act (“FLSA”), underscoring how the so-called “ABC” test more narrowly defines independent contractors.

In a significant decision highlighting the stringent nature of New Jersey’s ABC test—and its impact on the relationship between online platforms and content creators—the U.S. District Court for the District of New Jersey held that performers on an adult streaming platform were employees under New Jersey’s ABC test, despite qualifying as independent contractors under the FLSA’s “economic realities” test.

The case involved a class action lawsuit brought by adult performers on a streaming platform against its parent company (the “Platform”) under the FLSA, the New Jersey Wage and Hour Law, and the New Jersey Wage Payment Law. Plaintiffs alleged that they were improperly classified as independent contractors and, as a result, were denied full pay and benefits. Performers on the Platform livestreamed content and were free to set their own schedules and rates, as well as perform on competitors’ websites. The Platform required performers to sign “Performer Agreements,” which stated that they were independent contractors and imposed certain rules, with violations potentially resulting in suspension or termination of their accounts.

The FLSA Economic Realities Test:

Plaintiffs’ FLSA claims were analyzed under the six-factor economic realities test, which requires balancing the factors to determine whether the relationship reflects employment or independent contractor status. The court emphasized that no single factor is dispositive and that the analysis must consider the totality of the circumstances.

Applying this test, the court concluded that the performers “function[ed] as independent contractors rather than statutory employees entitled to FLSA protections.” Although three factors weighed in favor of independence and three in favor of employment, the court gave particular weight to the performers’ control over the timing, pricing, and location of their streams, as well as their ability to stream simultaneously on competing platforms.

 The New Jersey ABC Test:

The court evaluated the remaining state law claims under New Jersey’s ABC test. This three-part test examines whether: (A) the individual is free from the employer’s control or direction; (B) the individual performs work outside the employer’s usual course or place of business; and (C) the individual is customarily engaged in an independently established trade, occupation, profession, or business.

Unlike the multi-factor economic realities test, the ABC test is a conjunctive test requiring the employer to satisfy all three prongs to rebut the presumption of employment. The court emphasized the “rigid” and “unyielding” nature of this standard.

While the court found that the performers exercised sufficient control over their work so that the Platform could satisfy Prong A, it held that the Platform failed to establish Prong B. Specifically, the court concluded that the performers’ work was not outside the Platform’s usual course or place of business. The court found that “Performers [were] integral to Defendants’ business, rendering operations impossible without them.” Additionally, the court adopted a broad interpretation of “place of business,” holding that the Platform’s business “is not bounded by brick-and-mortar walls” but extends to its proprietary digital infrastructure. As a result, the performers operated within the Platform’s place of business.

Because failure to satisfy even one prong of the ABC test is dispositive, the court held that an employment relationship existed and declined to analyze Prong C.

Key Takeaways

This decision highlights the significant differences between the FLSA’s economic realities test and New Jersey’s “rigid” and “unyielding” ABC test. It also demonstrates how the same set of facts can yield different outcomes under these standards, as well as the challenges employers face in meeting their burden under New Jersey law. The ruling may have far-reaching implications for online companies operating in New Jersey and in other jurisdictions that utilize an ABC test.

By: Petersen D. Walrod, Christina Jaremus, and Brett C. Bartlett

Seyfarth Synopsis: On May 28, 2026, the U.S. Department of Labor (DOL) published four new opinion letters, covering situations including: (1) whether an exempt worker may perform non-exempt work; (2) whether a bonus structured as a percent of total earnings needs to include an overtime “true up”; (3) whether time spent traversing an employer’s premises to eat off site is compensable; and (4) whether an employer’s timekeeping practice of rounding, while also permitting pre-shift activities, was lawful.

The DOL’s opinion letter program aims to help employers and businesses make sense of the FLSA’s rules and regulations, and how they apply to specific factual situations. This program is clearly a priority for the current DOL. In the press release announcing the (re-)launch[1] of the DOL’s opinion letter program, now Acting Secretary Keith Sonderling commended opinion letters as “an important tool in ensuring workers and businesses alike have access to clear, practical guidance.”[2] Many employers and businesses agree, and stakeholders should welcome the recent launch of four new opinion letters.

The newly issued opinion letters cover the following issues:

  • 2026-05: An exempt employee can perform additional work in a secondary, non-exempt role without altering their exempt status under the FLSA.
  • 2026-06: A quarterly bonus that is a percentage of the business’s total earnings provides for the simultaneous payment of overtime compensation due on the bonus, and no further overtime payments are required.
  • 2026-07: Time spent traversing an employer’s premises during a meal period remains part of a bona fide meal period under 29 C.F.R. § 785.19.
  • 2026-08: A hospital’s practice of permitting early clocking-in, rounding, and permitting pre-shift work on various activities, likely resulted in at least some uncompensated working time.

The DOL’s Opinion Letter Program

Given the accelerated pace of DOL opinion letter activity in 2026, employers, businesses and other stakeholders should take a moment to size up the DOL’s opinion letter program as a whole.

The DOL’s opinion letter program allows members of the regulated community, including organizations, employers, and businesses as well as workers, to request the DOL’s opinion on the application of the law to a specific factual scenario. DOL opinion letters, and in particular, opinion letters issued by the Wage and Hour Division (WHD), the sub-agency of the DOL that enforces the FLSA, carry several benefits:

  • WHD opinion letters signal the enforcement policies and priorities of the WHD, a well-resourced enforcement agency with the broadest scope of any wage and hour agency in the country.
  • WHD opinion letters also have legal significance in certain situations, because they can constitute a “written administrative regulation, order, ruling, approval, or interpretation” that may entitle an employer to the protection of 29 U.S.C. § 259.
  • WHD opinion letters are “available as reasoned analyses at least on par with a law review article or an unpublished judicial decision.”[3]

In short, opinion letters clarify the law and enforcement environment for stakeholders. They are well worth paying attention to. They also represent a priority for the DOL’s current administration in general, and in particular, for now Acting Secretary Keith Sonderling, who as mentioned previously, is a proponent of the opinion letter program, and has extensive experience with the WHD in particular.

With the release of the four most recent letters, the total for 2026 increases to eight, bringing the cumulative total for the current Administration to thirteen. This indicates an accelerating pace, although the WHD in President Trump’s second term is still far short of matching the nearly 80 opinion letters that WHD issued in his first term.

WHD 2026-05

Question Presented: May an exempt Nursing Professional Development Specialist pick up shifts as a non-exempt Staff Nurse, even when those shifts account for up to 38% of hours worked in certain weeks?

Conclusion: The DOL concluded that an exempt employee may perform additional non-exempt work—such as in a secondary role—without losing their exempt status, so long as certain conditions are met.

Key Reasoning: The key takeaway is that the primary duty test remains the central focus, rather than the proportion of time spent on non-exempt tasks. The employee must continue to satisfy the salary basis test, and their primary duty must consist of exempt work. The DOL noted that while time spent can inform the analysis, time alone is not determinative, though spending over 50% of time on exempt work generally supports exemption. Additionally, salaried employees may receive extra compensation without losing exempt status, provided they are guaranteed at least the minimum required weekly salary under 29 C.F.R. § 541.604(a).

Takeaways:  The analysis is fact-specific, as the opinion itself emphasizes that its conclusions are based on the particular “circumstances presented.” Accordingly, employers must carefully evaluate each situation to ensure it is analogous before relying on the guidance. Employers should ensure that the employee’s most important responsibilities continue to be exempt work, even if they spend a meaningful portion of time performing non-exempt duties, and that they satisfy all other requirements for any particular exemption.

WHD 2026-06

Question Presented: Does a quarterly payment that constitutes a “percentage of total earnings” bonus that provides for the simultaneous payment of any overtime compensation due on the bonus comply with the FLSA’s overtime provisions?

Conclusion: The DOL concluded that a quarterly bonus calculated as a percentage of total earnings—including both straight-time and overtime—can satisfy overtime obligations without requiring a separate “true-up” recalculation, provided it is properly structured.

Key Reasoning: Under the FLSA, the default rule is that most non-discretionary bonuses must be included in the employee’s “regular rate of pay,” which typically requires employers to go back and recalculate overtime for the period the bonus covers. However, 29 C.F.R. § 778.210 creates an exception for bonuses based on a percentage of total earnings, so long as the percentage applies uniformly to both straight-time and overtime pay. In that circumstance, the overtime premium is already embedded in the bonus calculation. In the example analyzed by the DOL in its letter, employees receive a share of a bonus pool based on their proportion of pay to total company earnings, which inherently incorporated overtime into the calculation and satisfied the requirement that overtime be compensated “simultaneously.” The DOL noted that total earnings must include both straight-time and overtime pay, while excluding items not part of the regular rate, such as discretionary bonuses, gifts, expense reimbursements, or benefit contributions.

Takeaways: The DOL emphasized, however, that this structure must genuinely reflect overtime compensation and cannot be used to disguise underpayment, requiring a careful analysis of whether the formula truly accounts for overtime pay. The DOL also noted that a bonus pool that uses a metric other than the percent of gross sales revenue for the quarter would potentially comply with 778.210, including a “methodology tied to the employer’s quarterly profits or available financial assets.”

WHD 2026-07

Question Presented: Must an employer consider time an employee spends traveling off-site voluntarily for a meal when determining whether the meal period is compensable under 29 C.F.R. § 785.19?

Conclusion: The DOL concluded that the meal period was non-compensable because it met all the criteria of a bona fide meal period: it was at least 30 minutes in length, employees were fully relieved from duty, the time was uninterrupted, and it could be entirely used for personal purposes on or off-site.

Key Reasoning: The opinion letter addresses whether a 30-minute unpaid meal period becomes compensable work time when employees at a secured facility lose a portion of that break if they choose to leave the premises. In the scenario presented, employees worked at a large facility with controlled entry and exit points and parking located a considerable distance from work areas. While the employer provided a full 30-minute uninterrupted meal period, employees who elected to leave the premises had to spend 5–10 minutes walking to parking and additional time passing through security checkpoints, leaving only 10–15 minutes for an off-site meal. The DOL evaluated this issue under 29 C.F.R. § 785.19, which requires that a meal period be a bona fide break during which the employee is completely relieved from duty for personal purposes. The agency determined that the employer satisfied its obligations by offering a full, uninterrupted 30-minute break during which employees were entirely relieved of duty and free to remain on-site without restriction or time loss. The fact that employees could voluntarily leave the premises did not alter the analysis, even though doing so reduced the amount of usable break time due to walking and security procedures. The DOL viewed this lost time as incidental to the employee’s personal choice, not as employer-imposed restrictions. It also rejected any requirement that off-site meal periods be practically feasible or free from inconvenience, emphasizing that the FLSA guarantees only a genuine opportunity for relief from work, not an optimal or flexible off-site experience.

Takeaways: The analysis underscores that compensability hinges on employer-imposed restrictions, not employee preferences or voluntary choices. However, the opinion suggests that a different outcome could arise if the employer required employees to perform duties during the break, prohibited meaningful use of the time (outside of the minimal restrictions present in this example such as passing through security), or regularly interrupted the meal period. In such cases, the break might no longer qualify as bona fide, highlighting the importance of ensuring that employees remain fully relieved from duty during meal periods.

WHD 2026-08

Question Presented: Does a rounding policy that rounds clock-in times to the scheduled start time, and late clock-outs backward to the scheduled end time result in the adequate payment of compensable time, where employees engage in pre-shift and post-shift activities at times?

Conclusion: The DOL determined that certain pre-shift activities that employees engaged in were integral and indispensable to employees’ principal duties, making them compensable and marking the start of the continuous workday.

Key Reasoning: The factual scenario involves a large public hospital with approximately 18,000 non-exempt employees who are permitted to clock in up to seven minutes early and/or may clock out late due to bottlenecks at the timeclock. The hospital’s system rounds early clock-ins forward to the scheduled start time and late clock-outs backward to the scheduled end time. Many employees who clocked in early also begin performing job-related tasks—such as clinical preparation—immediately after clocking in early, resulting in work being performed before the scheduled shift without corresponding compensation. Significantly, the employer’s policy also prohibited employees from clocking out before the end of their shift. Accordingly, the example did not present a scenario of neutral rounding in which, for example, employees might lose time due to their hours being rounded up at the start of the shift, while gaining equal or more time at the end of the day if they clocked out early and their time was then rounded forward to the scheduled shift end. Under the FLSA’s “hours worked” standard, employers must pay for all work they “suffer or permit,” including work outside scheduled hours if the employer knows or should know it is occurring. Once employees begin principal work activities, all subsequent time until the end of the workday is generally compensable. The DOL also found that the employer either knew or should have known that employees were performing work before their scheduled shifts and allowed the practice to continue, thereby triggering an obligation to compensate that time.

Takeaways:  The key takeaway for employers is that all work performed must be paid regardless of scheduled hours, and even facially neutral policies—such as rounding or early clock-in allowances—can create liability if implemented in a way that permits or perpetuates off-the-clock work. Notably, the DOL also determined that the de minimis doctrine was deemed inapplicable because the pre-shift work appeared to be regular, recurring, and measurable (if the hospital honored their actual versus rounded start time), rather than sporadic or administratively difficult to track. And, the DOL concluded that the hospital’s rounding practices were not neutral in practice due to the policies described above and systematically undercounted compensable time and always benefited the employer. This raised risks of both minimum wage and overtime violations. In contrast, end-of-shift rounding may be permissible if employees are not performing work after their shift end time and the extra time is only compromised of time spent waiting in line to clock-out.

Conclusion

As noted above, the release of these four additional letters brings the cumulative total for the current Administration to thirteen, reflecting an accelerating pace of opinion letter issuance. Stakeholders should therefore anticipate a continued increase in opinion letter activity and, where appropriate, consider pursuing requests when a strong opportunity arises.

Seyfarth attorneys are closely monitoring the DOL’s opinion letter programs and are available to provide guidance on how the DOL’s opinions shape the law, and impact businesses and workers.

[1] Opinion letter issuance has ebbed and flowed across presidential administrations. For example, some administrations (e.g., Obama-era) suspended or replaced them with broader guidance (Administrator’s Interpretations). More recent years (e.g., Biden-era) saw very limited issuance of opinion letters. The current Administration is actively utilizing the DOL opinion letter program and did so during Trump’s first term, as did the Bush administration.

[2] https://www.dol.gov/newsroom/releases/osec/osec20250602.

[3] Keith E. Sonderling & Bradford J. Kelley, The Sword and the Shield: The Benefits of Opinion Letters by Employment and Labor Agencies, 86 Mo. L. Rev. 1171 at 1190 (2022). The reader should note that this analysis was co-authored by Acting Secretary Sonderling.

By: Gina Gi

Seyfarth Synopsis: The U.S. Supreme Court has resolved a circuit split, holding “last mile” drivers transporting goods within a single state can, but do not necessarily, fall within the transportation worker exemption under section 1 of the Federal Arbitration Act. As a result, such workers may be allowed to bypass mandatory arbitration agreements governed by the FAA.

Flowers Foods, Inc. v. Brock stems from a proposed class action filed in 2022 by drivers for an independent distributor of Flowers Foods. The drivers alleged that Flowers Foods misclassified them as independent contractors and underpaid them. These drivers picked up baked goods that arrived from out-of-state which were kept in a local warehouse, and then transported them to retail stores along their intrastate route. They never crossed state lines and never interacted directly with vehicles that did.

Flowers Foods moved to compel arbitration pursuant to an arbitration provision contained in the parties’ distribution agreement. The district court denied the motion, and the Tenth Circuit followed suit, reasoning that the drivers fell within Section 1’s exemption because their intrastate deliveries “formed a constituent part of the … interstate journey” from Flowers’ out-of-state bakeries to their ultimate destinations, the retail stores. The fact that the drivers never crossed state lines or directly interacted with interstate vehicles was not dispositive.

Flowers petitioned for review, urging the Supreme Court to adopt a bright line rule—that a worker can never qualify for the exemption unless the worker personally crosses state lines or directly loads or unloads a vehicle that did.

In a unanimous decision, the Supreme Court refused to create such a rule and affirmed the Tenth Circuit ruling. The Court found that neither the text of Section 1 nor its prior decisions supported the bright-line rule advocated by Flowers. Nothing in the statute expressly requires a worker to cross state lines or interact directly with a vehicle that does. Instead, the relevant inquiry is whether the class of workers “play[s] a direct and necessary role in the free flow of goods across borders.”

The Court drew support from its 2022 decision in Southwest Airlines Co. v. Saxon, in which airline cargo loaders qualified for the exemption even though they neither flew planes nor crossed state lines themselves. According to the Court, the focus is not on whether workers personally traverse state boundaries, but rather on the role they play in the interstate journey of the goods.

The Court also examined definitions of the terms “engage” and “interstate commerce” at the time of the FAA’s enactment. The Court observed that those definitions likewise contained no requirement that an individual personally cross state lines or directly interact with a vehicle engaged in interstate travel. The Court also looked to historical case precedent to reinforce its conclusion. The Court cited various cases decided in the decades preceding the FAA’s enactment. While those cases arose under the Commerce Clause, the Court found them highly probative of what it meant to be “engaged in commerce between the States” when Congress enacted the FAA.

Notably, the Court emphasized that Flowers Foods had raised several alternative arguments as to why the drivers may not qualify for the exemption, but chose not to seek review of those issues. It is unknown whether the Court’s outcome would have been different had Flowers asked it to discuss the ramifications of these issues. For example, Flowers observed that the drivers worked pursuant to a distribution agreement rather than a traditional employment contract, an issue some lower courts have considered relevant to whether a “contract of employment” exists for purposes of Section 1. Flowers also noted that the distributor took title to the baked goods before selling them to local retailers, a fact that some lower courts have considered relevant when determining whether they remained part of a continuous interstate journey.

Because Flowers elected to focus exclusively on securing a bright-line rule requiring interstate travel or direct interaction with interstate vehicles, the Court declined to address the significance of those other issues Flowers raised in passing. In effect, Flowers placed all of its emphasis on a single argument, and the Court rejected it.

As a result, several important questions remain unresolved. The Court did not address whether Section 1 applies to a contract between two business entities or to workers operating under a distribution agreement, rather than a traditional employment contract. Nor did it decide whether taking title to goods before transporting them within a state – such as for couriers fulfilling take-out orders made within a state – creates a new and distinct intrastate transaction for the goods, outside the scope of Section 1.

The decision leaves open other broader questions concerning the outer boundaries of the transportation worker exemption. While the Court made clear that drivers may qualify even when they never cross state lines or directly interact with interstate vehicles, it remains unclear whether warehouse workers, retail employees, or other non-drivers who handle goods that previously traveled in interstate commerce may likewise fall within the exemption. As that issue was not before the Court, lower courts will continue to grapple with where the interstate journey ends, and which workers are sufficiently connected to it. These questions are already the subject of active litigation across the country, and will continue to be litigated until the Supreme Court agrees to weigh in once again.

By: Kyle D. Winnick, Robert S. Whitman, and Joseph E. Abboud

Seyfarth Synopsis: The Second Circuit held that courts must dismiss out-of-state plaintiffs from FLSA collective actions unless the defendant is “essentially at home” in the forum state or consents to the suit in that venue.

In a significant decision that will affect the scope of FLSA collective action litigation, the Second Circuit has held that courts may not adjudicate claims of out-of-state plaintiffs unless the defendant-employer is “essentially at home” in the forum state or consents to the suit there.

The case involves the interpretation of a 2017 Supreme Court decision, Bristol-Myers Squibb Co. v. Superior Court of California (“BMS”), and deepens a circuit split that may end up at the Supreme Court in the near future. The Second Circuit joins the Third, Sixth, Seventh, and Eighth circuits in applying BMS to FLSA collective actions, with the First Circuit being the lone circuit to disagree.

This means that nationwide FLSA collective actions can only proceed in New York, Connecticut, or Vermont federal courts if the employer is “at home” in the forum state—that is, incorporated or headquartered there—or has otherwise consented to the court’s jurisdiction over all claims, including those unrelated to the forum state. Under the Second Circuit’s ruling, each employee participating in an FLSA collective action must independently establish that the court has jurisdiction over their claim. As the court acknowledged, its decision puts a halt to forum shopping, where litigants pick a court to bring nationwide claims “to capitalize on discrepancies between precedents in different circuits.” Plaintiffs no longer can subject employers to nationwide FLSA collective actions in federal courts within the circuit merely because the employer happens to do business in that state.

In this case, two Vermont delivery drivers sued a nationwide bakery in Vermont federal court, claiming that Vermont and out-of-state delivery drivers were all misclassified as independent contractors and owed unpaid overtime under the FLSA. Because the bakery was not based in Vermont, the Vermont federal court lacked the power to hear the claims of the out-of-state delivery drivers, which therefore must be dismissed.

With the Second Circuit joining the majority on this issue, the First Circuit’s contrary position is now an even greater outlier that will likely have less persuasive power on courts outside the First Circuit. Unless that court reverses its position and joins the majority soon, the Supreme Court may have to weigh in to resolve the circuit split and bring nationwide uniformity to FLSA collective action litigation.

Although this decision provides employers sued in the Second Circuit greater ability to oppose nationwide collective actions, employers must be mindful of potential consequences. Successfully preventing a nationwide action from proceeding in one state may invite a flood of copycat lawsuits in other states, or (more likely) a nationwide suit in the employer’s home state where it cannot invoke BMS. Nonetheless, the decision provides additional strategic options when facing putative FLSA collective actions.

By: Ariel D. Cudkowicz, Michael E. Steinberg, and Madeline R. Comer

Tips from Seyfarth is a blog series for employers, and their in-house lawyers and HR, payroll, and compensation professionals, in the food, beverage, and hospitality sector. We curate wage and hour compliance “tips” to keep this busy industry informed.

Seyfarth Synopsis: Effective July 1, 2026, all Florida food establishments must disclose any mandatory fee, not just automatic gratuities, on both the menu and bill.

We here at TIPS have been closely following a newly passed piece of legislation out of Florida relating to disclosure of charges by food establishments. The newly passed bill expands upon an existing statute, F.S.A. § 509.214, requiring public food establishments to disclose automatic gratuities and service charges to customers. The expanded law, which will come into effect on July 1, now requires food establishments to disclose any mandatory “operations charge,” not just automatic gratuities or service fees. The statute defines “operations charge” as an automatic fee or charge other than a tax that a customer is required to pay in addition to the cost of the food or beverage purchased, including—in addition to service charges and automatic gratuities—items such as credit card surcharges and delivery fees. This is a non-exhaustive list.

The statute further requires that the establishment disclose the amount or percentage of the charge and the purpose of the charge. These disclosures must appear on all written contracts, physical and digital menus, applications or websites for placing orders, and the face of the bill provided to the customer. The disclosures must appear in a font equal to or greater than the font used throughout the menu or bill, i.e., no “fine print.” If an establishment does not provide menus, the disclosure must be visible in an “obvious and clearly readable manner” on the menu board or sign near the register. Finally, the receipt must include separate lines for gratuity, operations charges, and sales tax.

Notably, the statute does not include a private right of action. This means that an individual customer cannot bring a lawsuit for an alleged violation of this law. However, employers should be aware that the state government has the authority to impose fines or sanctions for non-compliance.

This development reflects a national trend towards requiring food establishments and other sellers of goods and services to disclose mandatory fees that may impact the total price of a good or service purchased. For example, California, Colorado, Massachusetts, and New York City have all passed such laws targeting hidden fees in the last few years, indicating that more legislation of this nature potentially affecting restaurants’ disclosure of service charges, automatic gratuities, and other mandatory fees could be on the horizon. Stay tuned for our upcoming TIPS post about that growing national trend and its potential implications for restaurant and hospitality employers.

If you are a restaurant or hospitality employer looking for guidance on how to proceed in the wake of these recent developments regarding disclosure of mandatory fees, we encourage you to reach out to us or any member of Seyfarth’s Wage and Hour Litigation Practice Group.

By: Phillip Ebsworth and Natalie Kreeger

Seyfarth Synopsis: The Second District reversed an order denying a motion to compel arbitration, holding that multiple onboarding documents reflected a valid and enforceable agreement to arbitrate individual employment and PAGA claims, and that a wholesale PAGA waiver did not defeat enforcement where it could be severed consistent with Viking River Cruises, Inc. v. Moriana.

In Santana, the plaintiff signed three arbitration-related agreements during his employment onboarding with Studebaker. After his termination, Santana filed a wage and hour class action asserting various Labor Code claims, including a PAGA claim. Studebaker moved to compel arbitration of Santana’s individual claims, including his individual PAGA claim, which the trial court denied. The Second District, Division Seven, rejected the trial court’s conclusion that purported conflicts among the arbitration provisions defeated mutual assent and that a wholesale PAGA waiver rendered the agreement unconscionable.

The Court of Appeal held that any inconsistencies across the onboarding documents “at most, created an ambiguity regarding some aspect of the agreement to arbitrate,” not uncertainty negating the parties’ clear intent to arbitrate employment related disputes under the FAA, including Santana’s individual Labor Code and PAGA claims. Although one provision contained a wholesale PAGA waiver, the court held that it conflicted with multiple provisions preserving non-individual PAGA claims and could be severed under Viking River. The court therefore concluded that the agreement remained enforceable and directed the trial court to grant the motion to compel arbitration.

The decision serves as a reminder that arbitration agreements are to be construed in favor of arbitration and inconsistencies in agreements do not invalidate an arbitration agreement including an agreement to arbitrate individual PAGA claims.

By: Petersen D. Walrod and Andrew M. McKinley

Seyfarth Synopsis: On April 23, 2026, the U.S. Department of Labor (“DOL”) published a notice of proposed rulemaking for a new joint employer rule that would set a uniform test for joint employer status for purposes of the Fair Labor Standards Act (“FLSA”), Migrant and Seasonal Workers Protection Act (“MSPA”), and the Family and Medical Leave Act (“FMLA”). This article explains what this test does, how it is different from the previous joint employer rule promulgated by the DOL, and what may happen with it in the future.

Introduction – Federal Rulemaking Is Like a Box of Chocolates

Anyone who has ever plucked a nondescript chocolate from a half-eaten box of candy knows that, sometimes, you just have to pop it in your mouth to know what’s inside. And that is not much different from the reality businesses have long faced with respect to joint employment under the FLSA: set a nationwide strategy and wait until a lawsuit is filed to learn what jurisdiction-specific, multi-factor test may apply—tests that, at times, may lead to contrary results. The DOL’s new joint employer rule, published on April 23, 2026 (the “Proposed Rule”), however, seeks to remedy that problem by setting a common filling throughout the box: the same four Bonnette-style factors that the DOL used in its 2020 joint employer rule (the “2020 Rule”).

But this time, it is the outer coating that has changed. Having learned from the vacatur of the 2020 Rule—its last attempt at rulemaking on joint employment under the FLSA— the DOL has made a number of compromises that make the Proposed Rule less sweet and enticing (i.e., less business friendly) compared to the 2020 Rule, but perhaps more savory (i.e., more likely to be adopted by a court).

Background – The Messy Box of Chocolates that Is the Joint Employer Space

Much like a box of chocolate left out at a party, joint employer jurisprudence is a chaotic patchwork of different inquiries, tests, and factors for businesses and workers to navigate. For example, the 4th Circuit looks at whether the two putative joint employers are “completely disassociated” with one another, while the 2nd Circuit considers whether the putative joint employer has “functional control over workers.” Even where there is agreement on what test to use, different courts use different variants of factors or weigh them differently.

In 2016, the DOL issued subregulatory guidance that attempted to impose an expansive definition of joint employer status, but this guidance was rescinded in 2017. Then, in 2019, the DOL proposed a new joint employer rule, which was finalized as the 2020 Rule. The 2020 Rule adopted the analysis used in the seminal Ninth Circuit case of Bonnette v. California Health & Welfare Agency. But, in the interest of analytical clarity and certainty, it limited consideration of factors that did not bear on control, and it rejected evidence bearing on a worker’s economic dependence on the potential joint employer as irrelevant.

Eventually, on September 8, 2020, the Southern District of New York vacated the 2020 Rule in New York v. Scalia. It found that the 2020 Rule contradicted the text of the FLSA, placed too much emphasis on control in contravention of the FLSA’s more expansive “suffer or permit” language, improperly precluded consideration of economic dependence factors, and failed to adequately explain its change in prior position or to address increased costs to employers and workers.

On July 30, 2021, citing Scalia, the DOL withdrew the 2020 Rule. It did not issued a new joint employer test through notice and comment rulemaking until the Proposed Rule.

Analysis of the Proposed Rule – Filling and Coating

The Filling

For most people, the filling, whether it is nougat, caramel coconut cream, an almond, or simply milk chocolate, is the star of the show. The same is true here: most businesses and workers care about the core joint employer test. Like the 2020 Rule, the Proposed Rule codifies that there are two flavors of joint employment. The Proposed Rule proposes to codify them as: (1) vertical joint employment; and (2) horizontal joint employment.

For vertical joint employment, the Proposed Rule puts forward a test that is, at least with respect to its four primary factors, virtually identical with that promulgated by the 2020 Rule and that are largely based on Bonnette. Those factors are whether the putative joint employer:

  1. hires or fires the employee;
  2. supervises and controls the employee’s work schedule or conditions of employment to a substantial degree;
  3. determines the employee’s rate and method of payment; and
  4. maintains the employee’s employment records.

One who bites into the Proposed Rule, however, may notice an important difference in flavor. The Proposed Rule goes on to state that “[n]o single factor is dispositive in determining joint employer status under the FLSA, as the determination will depend on all of the facts in a particular case.” By contrast, the 2020 Rule attempted to limit consideration of this kind of “all of the circumstances” analysis to those that bore on control. This appears to be a compromise by the DOL to “cure” an issue with the 2020 Rule identified by New York v. Scalia.

The Proposed Rule also readopts the supplemental clarifying provisions from the 2020 Rule, including (1) a reasonably circumscribed definition of “employment records”; (2) an acknowledgment of the primacy of actual conduct versus reserved control; (3) clarification of the role of “indirect control” and minimization of situations in which recommendations result in the direct employer making voluntary choices; and clarification of factors that are not relevant, including those that “are primarily probative of a worker’s status as an employee or independent contractor.”

Similarly, under the Proposed Rule, horizontal joint employment will be determined by a test that is nearly the same as that finalized in the 2020 Rule. The key inquiry is whether the putative joint employers are “acting independently of each other and are dissociated with respect to the employment of the employee” or whether they are “sufficiently associated with respect to the employment of the employee.” To determine whether a sufficient level of association exists, the Proposed Rule considers whether: (1) there is an arrangement between them to share the employee’s services; (2) one employer is acting directly or indirectly in the interest of the other employer in relation to the employee; or (3) they share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer. As with the proposed test for vertical joint employment, the Proposed Rule inserts a compromise, explaining that “[s]uch a determination depends on all of the facts and circumstances.”

The Proposed Rule, again like the 2020 Rule, also clarifies the relevance of certain business models and business practices, including that:

  • Operating as a franchise or similar type of business model does not make joint employer status more or less likely;
  • Requiring a putative joint employer to satisfy legal obligations or quality control standards does not make joint employer status more or less likely;
  • The putative joint employer’s practice of providing the employer a sample employee handbook, or other forms, offering an association health or retirement plan, or any similar business practice, does not make joint employer status more or less likely.

Finally, the Proposed Rule, like the 2020 Rule, is sprinkled with examples that explain, clarify and make concrete these analyses. While, as discussed more below, these examples are organized differently, their nougaty substance is similar, other than those conformed to reflect substantive changes made to the Proposed Rule.

The Coating

Everyone has had the experience of eating two chocolates with different coatings, but much to one’s surprise, the same fillings. Here, the Proposed Rule and the 2020 Rule have similar tasting fillings, but with different coatings that fundamentally complement and change the flavor of the filling in different ways.

As mentioned above, the most important difference between the Proposed Rule and 2020 Rule is that the Proposed Rule does not seek to narrow the inquiry of “other circumstances” to those that bear on control, as the 2020 Rule did. The Proposed Rule also does not exclude—and in fact, expressly acknowledges—the relevance of “[i]ndicia of whether the employee is economically dependent on the potential joint employer,” in contrast with the 2020 Rule’s attempt to exclude such considerations.

Again, these changes are responsive to the court’s criticism in Scalia that the 2020 Rule hewed too closely to the common law test for employee status that the FLSA supposedly has rejected. By making these compromises, the DOL weakens the analytical clarity of the 2020 Rule, continuing a degree of uncertainty for businesses looking for definitive criteria to guide their decision-making. Now, extraneous facts that are not encompassed in the four factors, including those that bear on so-called “economic dependence” may potentially be relevant.  

In an attempt to cover the potential bitterness of this new coating, the DOL adds some clarification, explaining that any “additional factors” are less relevant than the four Bonnette-style factors, and that if the four Bonnette-style factors align, that outcome has a “substantial likelihood” of outweighing the additional factors. One may be forgiven for thinking that they have drawn the chocolaty form of the DOL’s Proposed Independent Contractor Test’s core-factor structure, although this is perhaps not an unwelcome surprise.

Finally, in a development that many might find sweet, the Proposed Rule has an expanded scope, as it also determines joint employer status under the FMLA and MSPA, in addition to the FLSA, whereas the 2020 Rule only covered the FLSA. Given that joint employer issues often are particularly salient for interstate operations that must undergo compliance with all of these statutes, this added uniformity will help increase clarity and certainty.

Overall, businesses and workers may find the Proposed Rule’s new coating slightly less enticing than that of the 2020 Rule. But, importantly, courts may find it more palatable, based on their interpretations of the FLSA and Supreme Court precedent interpreting the FLSA.

Aftertaste

The Proposed Rule is not a final rule. It was published in the Federal Register on April 23, 2026, and it will be open for public comment for sixty days (through June 22, 2026), after which the DOL will review public input and determine what, if any, revisions to include in a final rule. The timeline from proposed rule to final rule can take several months—and likely significantly longer—and the DOL may alter aspects of the proposal in response to comments.

As with chocolates, some courts will pick out the Proposed Rule while others will stick with their preferred flavors. Courts retain ultimate authority to determine who is or is not a joint employer, and whether any court will actually defer to the Proposed Rule—particularly in the face of binding circuit court-level precedent—is far from a certainty. And even then, those many circuit-level tests have proliferated to the analyses of many state-level statutes, which will be wholly unaffected by the Proposed Rule.

The Rule does provide certainty in at least one respect: as the DOL acknowledges in the Proposed Rule, it ensures that, for DOL enforcement personnel, there is a uniform standard being applied to determine whether joint employment relationship exists. That is, while courts may still elect to apply different tests in jurisdiction, the DOL will seek to enforce solely the test articulated in the Proposed Rule nationwide.

And ultimately, while the Proposed Rule perhaps shies further away from definitive criteria than many would have hoped, it is an improvement over the current absence of any rule. It provides an analytically clear and reasonably defensible version of the test that provides guidance for how to interpret the factors and apply them in real world situations.