On Sept. 30, 2025, the U.S. Department of Labor issued four opinion letters on a range of issues under the Fair Labor Standards Act (FLSA) and Family and Medical Leave Act (FMLA). Three opinion letters offer guidance on unique scenarios under the FLSA, including which employees to include and exclude from tip pools when applying a tip credit, what types of pay should be included in calculating overtime rates, and whether separately incorporated entities should be considered joint employers. The fourth opinion letter offers guidance on how to calculate FMLA leave for employees with unique schedules that include mandatory overtime. Collectively, these opinions clarify how the DOL interprets the FLSA and FMLA and provides additional guidance for employers.
Below are summaries of each opinion letter.
Inclusion of Customer-Facing Employees in Tip Pools
The FLSA allows employers to combine tips received by certain employees and credit them toward the employers’ obligation to pay the minimum wage, provided that the employers pay an hourly rate of at least $2.13. But employers may take the tip credits and pool tips only for “tipped employees.” Violation of this rule can result in employer liabilities to both the workers who improperly participate and the workers whose tips are shared. Employees’ eligibility to participate in tip pools and qualify for tip credits depends on how much they interact with customers.
According to opinion letter FLSA2025-03, “front-of-house” oyster shuckers at a restaurant work at a visible oyster bar, prepare oysters in view of customers, interact with patrons by describing offerings and making suggestions, and field customer questions. Separate “back-of-house” shuckers work in the kitchen with no customer interaction. The front-of-house shuckers participate in the tip pool with tipped servers, but the “back-of-house” shuckers do not. The DOL found that this arrangement complies with tip credit requirements. The key factor is the employees’ involvement in customer service. Employees who regularly interact with customers, such as sommeliers and sushi chefs, are considered tipped occupations, but those with minimal customer interaction cannot be included.
“Emergency Pay” Included in Regular Rate
Questions often arise about whether certain pay should be included in nonexempt employees’ “regular rate” used to compute overtime. In an example from opinion letter FLSA2025-04, a city’s firefighter/paramedic employees receive an “emergency pay” premium of one-half of their base pay for all hours worked during specially declared “emergency periods.” The DOL found that such emergency pay must be included in the regular rate, even though it is already paid at time-and-a-half. Employers should note that this may result in “pyramiding,” in which time-and-a-half premium pay contributes to the base on which time-and-a-half must be paid for overtime.
The FLSA requires all compensation to be included in the regular rate unless its falls under a list of exceptions, such as amounts paid for most employee benefits. The DOL considered if the emergency pay could be excluded as a discretionary bonus because the city was not required to declare emergencies. But it found such pay was included in the regular rate because the decision to pay it had been made when the emergencies were declared, not “at or near” the end of the bonus period as required. The DOL also found the payments did not qualify for other exceptions for hours beyond normal or regular working hours, or on holidays or certain days of the week. Employers should note that “clock patterns” other than normal working hours are not a permissible basis for exclusion; thus premiums paid for shift differentials or hours worked from, say, 11 p.m. to 7 a.m., must normally be included in the regular rate.
Joint Employment and Aggregation of Hours
A restaurant and a members-only club operate on separate floors of the same hotel, share a kitchen, offer similar menus and appear to have common ownership. Employees perform work in both establishments during the same workweek and sometimes even the same shift. Managers from the restaurant are involved in disciplinary matters at the club. An employee asked if she qualified for overtime based on combined hours worked for both companies.
In opinion letter FLSA2025-05, the DOL found that the hours worked for the restaurant and the club must be combined before determining if overtime is owed. Formal or legal separation of the employing entities is not a sufficient defense. The FLSA treats employment by two or more separate entities as joint when they share employees’ services, such as by interchanging employees. The DOL considers this “horizonal” joint employment, as opposed to “vertical” joint employment between a staffing agency and its customers. In this case, the DOL had no difficulty concluding the restaurant and the club were joint employers such that employees’ hours for both should be combined for FLSA purposes. Employers should note that joint employers are each jointly and severally liable for FLSA compliance.
Calculating FMLA Leave for Schedules With Mandatory Overtime
An eligible employee’s annual FMLA allowance is 12 weeks per year. How should employers compute that entitlement when hours vary from the normal 40 hours a week? In this case, some law enforcement employees worked a cycle that totaled 84 hours every two weeks, with the option to volunteer for more. The employer calculated the 12-week FMLA leave requirement by multiplying the 42 mandatory hours per week by 12 and tracked FMLA against the resulting allowance of 504 hours per year, rather than the 480 hours that would correspond to a 40-hour workweek.
In opinion letter FMLA2025-02-A, the DOL found that this method complied with the FMLA. The opinion letter explained that “an employer may calculate an employee’s FMLA leave entitlement by converting fractions of a workweek of leave to their hourly equivalent in a manner that equitably reflects the employee’s total normally scheduled hours.” Usage works similarly, calculated as the number of mandatory hours the employee would have worked but for the leave. Thus, a typical 40-hour per week employee who misses one 8-hour day of normally scheduled work for FMLA uses 1/5th of a week of leave, but the employer may track that by deducting 8 hours from a 480-hour annual allowance.
The DOL noted that additional involuntary hours of extra work should count toward the allowance, and that hours of such work missed for FMLA “may be counted against the employee’s FLSA entitlement.” But additional time voluntarily worked will not contribute to employee’s leave allowance, nor will missing such work count as leave. The DOL allows that if an employer is unable to determine precisely how many hours an employee would have worked but for the leave, it can use a trailing 12-month average.
The DOL did not directly discuss two other points. First, the opinion letter did not mention if the employee’s 84 hours were evenly split between the two weeks of the schedule, so the DOL appeared to accept averaging between weeks in determining the FMLA allowance. Second, the DOL did not address how to reconcile what occurs if an employee transfers between jobs with different averages of weekly mandatory hours. Those questions may be left for future opinion letters.
The DOL’s issuance of these letters reflects the current administration’s willingness to use opinion letters to provide guidance to employers and employees. For a focused review of payroll and timekeeping practices, or to discuss an issue that may need a DOL opinion, contact the authors of this article or another member of the McGuireWoods labor and employment team.