The U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD) recently published two opinion letters. These letters clarify how employers may coordinate paid family leave benefits with leave taken under the Family and Medical Leave Act (FMLA) and address tip pooling under the Fair Labor Standards Act (FLSA).
Leave Substitution and Other Paid Leave Programs
The FMLA allows eligible employees to take up to 12 weeks of unpaid, job-protected leave for specific family and medical reasons. Employees may substitute accrued paid leave, such as vacation/PTO or sick time, for any part of this unpaid leave.
The DOL’s opinion letter (FMLA2025-1-A) affirms that if an employee takes state or local paid family or medical leave that also qualifies as FMLA leave, it must be designated as FMLA leave.
Additionally, the opinion letter clarifies that the same principles that apply to disability plans and workers’ compensation programs also apply to state or local paid family or medical leave programs when running concurrently with FMLA leave. While substituting paid leave is allowed for unpaid FMLA leave, it does not apply to the portion of leave already covered by another paid program. However, employers and employees may agree to use employer-provided paid leave to supplement payments from other programs, potentially allowing employees to receive their full salary while on leave.
This means that if an employee is receiving compensation through a state or local paid family or medical leave program that does not fully compensate them for their FMLA-covered leave, and they also have available employer-provided paid leave, the employer and employee may agree (where state law permits) to use accrued employer-provided paid leave to supplement the payments under the state or local leave program.
If an employee exhausts state/local paid leave but still has remaining unpaid FMLA leave, the FMLA’s substitution provision applies. At this point, the employer may require, or the employee may elect, to use accrued employer-provided paid leave to cover the remaining unpaid FMLA leave.
Tip Pooling
The DOL’s opinion letter (FLSA2025-1) clarifies the FLSA tip pooling rules and how they apply to different employee roles in a quick-service restaurant setting. Under the FLSA, employers cannot allow exempt managers or supervisors to keep any portion of employees’ tips, including through a tip pool.
The definition of a manager or supervisor follows the executive employee duties test under the FLSA, which considers job responsibilities such as hiring, firing, and managing staff. Even if a manager or supervisor temporarily performs non-managerial duties, they still cannot participate in a tip pool, as their primary duty remains management.
However, if an individual’s duties do not meet the executive duties test, they can participate in tip pools, even if they are the highest-ranking employee during a shift. Furthermore, the FLSA prohibits tip pools consisting solely of managers and supervisors, as this would still involve distributing tips among employees classified as managers. However, managers and supervisors may keep tips they receive directly from customers for the service they personally and solely provide.
Next Steps for Employers
Employers should review these opinion letters and ensure their policies and practices comply. They should also provide training for managers and supervisors on the FMLA and FLSA requirements.
FMLA Compliance
- Update Policies and Procedures: Review and update leave policies and procedures to ensure compliance with both FMLA and state/local paid leave laws. Specifically, if needed, update policies and procedures to ensure employees are not required to use vacation/PTO or sick time concurrently with state or local paid leave unless both parties agree and state law permits.
- Educate and Train: Train human resource staff or those responsible for leave administration on the distinction between FMLA and state/local leave requirements.
Tip Pool Compliance
- Evaluate Employee FLSA Classifications: Evaluate job roles to determine whether employees qualify as managers or supervisors under the executive duties test.
- Review Tip Pool Practices: Ensure that only non-managerial employees participate in tip pools to avoid FLSA violations.
How HR Works Can Help
Current HR Works’ Virtual HR Helpline subscribers have unlimited access to answers to questions about the proposed FLSA exempt salary increase, as well as other HR and employment law topics, and 24/7 access to HR Works’ attorney-reviewed online compliance resource center (Comply), which offers human resources tools, forms, and other compliance resources. Additionally, Virtual HR Helpline subscribers receive two free FLSA Assessments each year (with the option to purchase additional assessments for a fee). The HR Helpline can be reached at hrhelp@hrworks-inc.com or by calling 888-668-1271.
HR Strategic Services clients may contact their designated HR Consultant for additional guidance and assistance with these changes and/or to request FLSA Assessments.
Non-HR Works clients may contact us for HR solutions by calling toll-free at 1-877-219-9062 or visiting our website.
