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2026 FLSA Update: Key Takeaways from Opinion Letters
The U.S. Department of Labor’s Wage and Hour division (WHD) has opened 2026 with a wave of FLSA opinion letters. Can a highly credentialed role lose exempt status after a pay change? Should performance bonuses factor into overtime math? Can a collective bargaining agreement (CBA) carve out mandatory pre-shift time from overtime? The WHD has weighed in, offering clarity that could reshape how organizations think about salary basis, incentive pay, and collectively bargained schedules. These letters offer a roadmap of emerging wage-and-hour pressure points HR leaders should understand.
Exempt Duties and Nonexempt Pay
FLSA2026-1 concluded that a Utah-licensed licensed clinical social worker performing clinical assessments, treatment planning, crisis intervention, and other judgment-driven social-work duties would generally satisfy the duties test for the FLSA’s learned professional exemption. This is because the work required advanced knowledge customarily gained through prolonged specialized instruction.
However, the letter emphasized that meeting the duties criteria is not sufficient on its own. An employee must also meet the compensation test, which requires payment on a salary basis, not hourly. Because the worker was reclassified from salaried (exempt) to hourly (nonexempt) after losing supervisory duties, the WHD explained that switching to hourly pay would likely defeat the exemption, even if clinical duties remain unchanged.
The agency reiterated that the FLSA does not obligate employers to claim an exemption for a qualified professional. Employers may lawfully choose to classify eligible workers as nonexempt, so long as they pay at least minimum wage and overtime for hours worked over 40. The act only prohibits the reverse: misclassifying a nonexempt role as exempt.
The letter also notes that employers may still provide scheduling flexibility and benefits similar to exempt roles.
Bonuses and Overtime Math
FLSA2026-2 addressed a waste-management driver bonus plan and concluded that the employer could not exclude incentive bonuses from the FLSA “regular rate of pay” under Section 7(e)(3). This is because the bonuses were formula-based, tied to attendance, safety tasks, attire, and efficiency metrics, and communicated in advance. This made them nondiscretionary incentives, not discretionary bonuses.
Therefore, the bonuses had to be included in the regular rate for each workweek they were earned when calculating overtime.
Using the employer’s own 50-hour hypothetical (base $12/hr + $9.50/hr bonus = $21.50 regular rate), the WHD clarified that the employer still retains discretion not to claim the exemption, but once bonuses are paid, overtime must be computed as a half-time premium on the true regular rate for that specific workweek.
The letter reiterated the core rule that the FLSA only prohibits misclassifying nonexempt roles as exempt, and that employers must ensure overtime premiums fully reflect all incentive remuneration in the week it is earned, allocating bonuses by hours worked per workweek when the bonus period spans multiple weeks.
Pre-Shift Roll Call Is Work Time
FLSA2026-3, addressing a proposed 911-dispatcher CBA, concluded that a mandatory 15-minute pre-shift “roll call” is compensable FLSA work time. This is because employees are required to be on the employer’s premises and perform job-related duties before their scheduled shift. As such, the time must be counted toward hours worked each workweek when determining whether employees exceed 40 hours and are owed overtime.
However, the WHD explained that a properly drafted CBA could qualify for the FLSA’s partial overtime exemptions under Section 7(b)(1) or Section 7(b)(2). These allow employers and unions (certified as bona fide by the National Labor Relations Board) to modify overtime obligations only if the CBA guarantees a minimum annualized schedule and pays overtime for hours exceeding 12 per day or 56 per week. Under the facts assumed, a 4-on/2-off schedule with 8-hour shifts plus 15 minutes per shift (equaling 1 hour per 6-day cycle) would not breach the 1,040-hour/26-week cap for the Section 7(b)(1) exemption, nor trigger overtime under the 12-hour-per-day or 56-hour-per-week thresholds.
Still, the WHD underscored that the agency cannot affirm exemption status without reviewing the final CBA text. In short, the pre-shift time must be counted as hours worked, and any reduction in overtime liability depends entirely on whether the CBA is structured to meet the statute’s narrow partial-exemption criteria.
Commission Exemption Eligibility
The final WHD opinion letter, FLSA2026-4, interpreted FLSA Section 7(i). It clarified that covered retail or service employers should use the federal minimum wage — not a higher state minimum — to assess the 1.5× minimum pay threshold required for purposes of the federal commission exemption.
Nonetheless, the WHD noted, “An employer must ensure compliance with all applicable laws, and, because the FLSA’s minimum wage requirement is a federal floor that does not pre-empt state or local laws, there may be situations in which a higher state or local rate applies as well. A higher state or local minimum wage, however, is irrelevant to the particular parameters of Section 7(i), where the statute explicitly sets forth a special rule to carve out certain workers.” Noting some conflict in the courts on this issue, the WHD said, “An employer’s noncompliance with a more protective state law (based on the state’s own law and definitions) might give rise to a state law claim, but it will not defeat the FLSA exemption if all of Section 7(i)’s statutory requirements are met.”
The agency also explained that tips are not commissions, but a portion of tips may count as “compensation” toward the >50% commissions test only when the employer actually takes a tip credit to satisfy a wage obligation under federal, state, or local law. In other words, tips factor into the Section 7(i) calculus only to the extent they are applied as a credit against a statutory wage requirement, not merely because they are earned.
The WHD stated that employers are not required to claim the Section 7(i) exemption even if a worker qualifies, and that the law only prohibits the opposite error — treating a nonexempt role as exempt.
Finally, the letter underscored that because commission and tip-credit earnings fluctuate, employers must regularly audit Section 7(i) exemption eligibility on an employee-by-employee, workweek-by-workweek basis to ensure both pay prongs are met during the representative period for which the exemption is claimed.
This article is courtesy of Society for Human Resource Management (SHRM)
