Part 777-General Statement as to the Methods of Payment Under the Fair Labor Standards Act and the Application of Section 3(m) Thereto UNITED STATES OF AMERICA Section 777.0-INTRODUCTORY STATEMENT (a) Since the enactment of the Fair Labor Standards Act of 1938, the views of the Administrator of the Wage and Hour Division as to the methods of payment of the compensation required to be paid employees under the act, and the application of section 3 (m) thereto, have been expressed in interpretations issued from time to time in various forms. This part, as of the date of its publication in the Federal Register, supersedes and replaces such prior interpretations. Its purpose is to make available in one place general interpretations as the Administrator which will provide "a practical guide to employers and employees as to how the office representing the public interest in enforcement of the law will seek to apply it."1 The interpretations contained in this part indicate, with respect to the methods of paying the compensation required by sections 6 and 7 and the application thereto of the provisions of section 3 (m) of the act, the construction of the law which the Secretary of Labor and the Administrator believe to be correct and which will guide them in the performance of their administrative duties under the act unless and until they are otherwise directed by authoritative decisions of the courts or conclude, upon reexamination of an interpretation, that it is incorrect. The interpretations contained in this part are interpretations on which reliance may be placed 1 Skidmore v. Swift & Co., 323 U.S. 134: Under Reorganization Plan No. 6 of 1950 (15 F.R. 3174), effective May 24, 1950, and pursuant to General Order No. 45A issued by the Secretary of Labor on the same date, interpretations of the provisions (other than the child labor provisions) of the Fair Labor Standards Act, as amended, are issued by the Administrator of the Wage and Hour Division on the advice of the Solicitor of Labor, subject to the general direction and control of the Secretary. See 15 F.R. 3290. Section 16 (c) of the Fair Labor Standards Amendments of 1949 (63 Stat. 910) provides : Any order, regulation, or interpretation of the Administrator of the Wage and Hour Division or of the Secretary of Labor, and any agreement entered into by the Administrator or the Secretary, in effect under the provisions of the Fair Labor Standards Act of 1938, as amended, on the effective date of this act, shall remain in effect as an order, regulation, interpretation, or agreement of the Administrator or the Secretary, as the case may be, pursuant to this act, except to the extent that any such order, regulation, interpretation, or agreement may be inconsistent with the provisions of this act, or may from time to time be amended, modified, or rescinded by the Administrator or the Secretary, as the case may be, in accordance with the provisions of this act. as provided in section 10 of the Portal-to-Portal Act, so long as they remain effective and are not modified, amended, rescinded, or determined by judicial authority to be incorrect. (b) Effective on the date of publication of this part in the Federal Register (January 30, 1948), all prior general and specific interpretations contained in interpretative bulletins, releases, opinion letters, and other statements issued with respect to the interpretation of the provisions of the Fair Labor Standards Act of 1938 as they relate to the methods of paying the requisite compensation and the application of section 3(m) thereto are rescinded and withdrawn. An interpretation so rescinded and withdrawn shall not hereafter constitute an interpretation of the Administrator unless and until it is reissued as such. However, the action of the Administrator in rescinding or withdrawing any such prior interpretation or his omission to discuss a particular problem in this part or in interpretations supplementing it does not constitute an administrative interpretation or practice or enforcement policy. 3 [Paragraph (a) amended, 16 F.R., 6244, June 28, 1951] Section 777.1-RELATION TO OTHER LAWS Various Federal, State, and local legislation. requires the payment of wages in cash; prohibits or regulates the issuance of scrip, tokens, credit cards, "dope checks" or coupons; prevents or restricts payment of or facilities; controls company stores and comwages in services missaries; outlaws "kick-backs"; restrains assignment and garnishment of wages; and generally governs the calculation of wages and the frequency and manner of paying them. Where such legislation is applicable and does not contravene the requirements of the Fair Labor Standards Act of 1938, nothing in the act, the 2 Public Law 49, 80th Cong., 1st sess. (61 Stat. 84) discussed in Part 790 (statement on effect of Portal-to-Portal Act of 1947). See in this connection Reorganization Plan No. 6 of 1950 (15 F.R. 3174) and footnote 1, above. 3 This does not affect Part 531 of this chapter, containing official "reasonable cost" regulations issued pursuant to the authority conferred by section 3 (m) of the act, or any finding and determination of reasonable cost made pursuant thereto, or Part 516 of this chapter, containing official record-keeping regulations issued pursuant to the authority conferred by section 11(c) of the act. regulations, or the interpretations announced by the Administrator should be taken to override or nullify the provisions of these laws. The following discussion deals only with the independent requirements of the Fair Labor Standards Act. HOW PAYMENT MAY BE MADE Section 777.2-PAYMENT IN CASH OR (a) Standing alone, sections 6 and 7 of the act require payment of the prescribed wages, including overtime compensation, in cash or negotiable instrument payable at par. Section 3(m) provides that the "wage' paid to any employee includes the reasonable cost, as determined by the Administrator, to the employer of furnishing such employee with board, lodging, or other facilities, if such board, lodging, or other facilities are customarily furnished by such employer to his employees." It is section 3(m) which permits and governs the payment of wages in other than cash. (b) It should not be assumed that because the term "wage" does not appear in section 7, all overtime compensation must be paid in cash and may not be paid in board, lodging, or other facilities. There appears to be no evidence in either the statute or its legislative history which demonstrates the intention to provide one rule for the payment of the minimum wage and another rule for the payment of overtime compensation. The principles stated in para 4 Sec. 6 requires the payment of a minimum wage rate of not less than $1.00 per hour, except in certain industries in Sec. 7 requires the Puerto Rico and the Virgin Islands. payment of overtime compensation at not less than one and one-half times the employee's regular rate of pay for all hours The general wage worked in excess of 40 in a work week. and hours provisions of the law are subject to qualifications See Parts 779 contained in secs. 7(b)-(g), 13, and 14. through 784, 786 through 788 of this chapter. See Cf. Tips may be credited or offset against the wages payable under the act in certain circumstances, if the employment agreement is such that the tips belong to the employer. Williams v. Jacksonville Terminal Co., 315 U.S. 386. Southern Ry. Co. v. Black, 127 F. (2d) 280 (C.A. 4); Townsend v. New York Central RR. Co., 141 F. (2d) 483 (C.A. 7), certiorari denied, 323 U.S. 717; Harrison v. Terminal RR. Assn., 126 F. (2d) 421 (C.A. 8); Harrison v. Kansas City Terminal Ry. Co., 126 F. (2d) 422 (C.A. 8); Ryan v. Denver Union Terminal Ry. Co., 126 F. (2d) 782 (C.A. 10). this connection the record-keeping requirements contained in sec. 516.19 of this chapter. See in graph (a) of this section, are considered equally applicable to payment of the minimum wage required by section 6 and to payment, when overtime is worked, of the compensation required by section 7. Thus, in determining whether he has met the minimum wage and overtime requirements of the act, the employer may credit himself with the reasonable cost to himself of board, lodging, or other facilities customarily furnished by him to his employees. Unless the context clearly indicates otherwise, the term "wage" is used in this part to designate the amount due under either section 6 or section 7 without distinction. Section 777.3-RESTRICTIONS APPLICABLE WHERE PAYMENT IS NOT IN CASH It appears to have been the clear intention of Congress to protect the basic minimum wage and overtime compensation required to be paid to the employee by section 6 and 7 of the act from profiteering or manipulation by the employer in dealings with the employee. Section 3(m) of the act and Part 531 of this chapter, issued under the authority contained in that section, accordingly prescribe certain limitations and safeguards which control the payment of wages in other than cash. These provisions, it should be emphasized, do not prohibit payment of wages in facilities furnished either as additions to a stipulated wage or as items for which deductions from the stipulated wage will be made; they prohibit only the use of such a medium of payment to avoid the obligation imposed by sections 6 and 7. Section 777.4-BOARD, LODGING, OR OTHER FACILITIES Section 3(m) applies to both of the following situations: (a) Where board, lodging, or other facilities are furnished in addition to a stipulated wage; and (b) where charges for board, lodging, or other facilities are deducted from a stipulated wage. The use of the word "furnishing" and the legislative history of sec Special record-keeping requirements must also be met. These are contained in part 516 of this chapter. tion 3 (m) clearly indicate that this section was intended to apply to all facilities furnished by the employer as compensation to the employee, regardless of whether the employer calculates charges for such facilities as additions to or deductions from wages. Section 777.5—“FURNISHED" TO THE EMPLOYEE The reasonable cost of board, lodging, or other facilities may be considered as part of the wage paid an employee only where customarily "furnished" to the employee. Not only must the employee receive the benefits of the facility for which he is charged, but it is essential that his acceptance of the facility be voluntary and uncoerced. Section 777.6-"CUSTOMARILY" The reasonable cost of board, lodging, or other facilities may be considered as part of the wage paid an employee only where "customarily" furnished to the employee. Where such facilities are "furnished" to the employee, it will be considered a sufficient satisfaction of this requirement if the facilities are furnished regularly by the employer to his employees or if the same or similar facilities are customarily furnished by other employers engaged in the same or similar trade, business, or occupation in the same or similar communities. Facilities furnished in violation of any Federal, State, or local law, ordinance or prohibition will not be considered facilities "customarily" furnished. 7 Section 777.7-"OTHER FACILITIES" (a) "Other facilities," as used in this section, must be something like board or lodging. The following items have been deemed to be within the meaning of the term: Meals furnished at company restaurants or cafeterias; housing furnished for dwelling purposes; general mer 'See Williams v. Atlantic Coast Line Railroad Company (E.D.N.C.), decided February 19, 1940 (1 W.H. Cases 289). 'See Walling v. Alaska Pacific Consolidated Mining Co., 152 F. (2d) 812 (C.A. 9), cert. denied, 327 U.S. 803; Southern Pacific Co. v. Joint Council (C.A. 9), 7 W.H. Cases 536. chandise furnished at company stores and commissaries (including articles of food, clothing, and household effects); fuel (including coal, kerosene, firewood, and lumber slabs), electricity, water, and gas furnished for the noncommercial personal use of the employee; transportation furnished employees between their homes and work where the travel time does not constitute hours worked compensable under the act and the transportation is not an incident of and necessary to the employment. (b) Shares of capital stock in an employer company, representing only a contingent proprietary right to participate in profits and losses or in the assets of the company at some future dissolution date, do not appear to be "facilities" within the meaning of the section. (c) It should also be noted that under section 531.1(d) of this chapter "the cost of furnishing 'facilities' which are primarily for the benefit or convenience of the employer will not be recognized as reasonable and may not therefore be included in computing wages." Items in addition to those set forth in section 531.1 of this chapter, which have been held to be primarily for the benefit or convenience of the employer and are not therefore to be considered "facilities" within the meaning of section 3 (m) include: Safety caps, explosives, and miners' lamps (in the mining industry); electric power (used for commercial production in the interest of the employer); company police and guard protection; taxes and insurance on buildings of the employer; "dues" to chambers of commerce and other organizations used, for example, to repay subsidies given to the employer to locate his factory in a particular community; transportation charges where such transportation is an incident of and necessary to the employment (as in the case of maintenance-of-way employees of a railroad); charges for rental of uniforms where the nature of the business requires the employee to wear a uniform; medical services and hospitalization which the employer is bound to furnish under workmen's compensation acts or similar Federal, State, or local law.a Ta For a discussion of reimbursement for expenses, such as "supper money," "travel expenses," etc., see section 778.7 (b) of this subchapter. |