In 2020, Lowe’s non-exempt hourly workers sued the home improvement retailer under the Fair Labor Standards Act (FLSA) for failing to include payment of a one-time premium and payment for time spent in volunteer activities. charity, in the “regular” used to calculate their overtime pay. The US District Court for the Western District of North Carolina dismissed the lawsuit. On June 17, 2021, the Fourth Circuit Court of Appeal upheld the dismissal, ruling that the bonus and volunteer time were correctly excluded from the calculation of overtime pay. McPhee v. Lowe’s Home Centers, LLC. The Fourth Circuit has jurisdiction over the federal courts of the Carolinas, Maryland, Virginia, and West Virginia.
The FLSA requires employers to pay employees who work more than 40 hours per week at a rate of one and a half times their regular rate of pay. It provides that the regular rate includes “any remuneration for employment paid to or on behalf of the employee”, subject to several exceptions. The exceptions include:
- “[S]sums given as gifts; payments in the form of gifts made at Christmas time or on other special occasions, as a reward for service, the amounts of which are not measured by or do not depend on hours worked, production or efficiency.
- “[P]payments made for occasional periods when no work is performed.
- Discretionary bonuses; for a bonus to be discretionary, “the employer must retain discretion both as to the fact of the payment and as to the amount until quite close to the end of the period for which the bonus is paid”.
The Fourth Circuit concluded that the premium in question, which was paid on the occasion of the adoption of the 2018 revisions of the Federal Tax Code, was rightly excluded from the calculation of the regular rate as a gift or discretionary premium. . The court rejected the claim that the bonus was a non-discretionary retention bonus.
The Fourth Circuit also found that compensation for time spent volunteering under the company’s âGive Back Timeâ program was rightly excluded, as it was not compensation for âworkâ. The Give Back Time program offered eligible employees paid time off to volunteer with the charities of their choice. The tribunal gave three reasons for its conclusion:
- The employees did not plead facts tending to show that “their volunteer work for non-profit third parties was for the primary benefit of Lowe’s.”
- It was “undisputed that Lowe’s did not require participation in the Give Back Time program and that those who decided to participate chose their own nonprofit, determined the number of volunteer hours and worked under the direction of the ‘nonprofit organization. “
- Employees “do not allege how Lowe’s benefited from the program, and in any event, third-party nonprofits were clearly the primary beneficiaries.”
The fourth circuit cited a 2019 US Department of Labor Opinion Letter which said “the time an employee spends participating in an employer’s voluntary volunteer program … does not count as hours worked under the FLSA, as long as [the employer] does not unduly pressure its employees to participate.
Lowe’s decision offers valuable advice to employers in the Carolinas, Maryland, Virginia, and West Virginia looking to set up a program to encourage employees to volunteer with charitable organizations:
- Not directly or indirectly require or coerce employees to participate in the program;
- Not to control or direct volunteer work; and
- Make sure that the primary beneficiary of the work is the charity, not the employer.
For more information on volunteer leave programs, see âEmployee Volunteer Community Service: Compensable or Not? “ Keep in mind that some states have wage and hour laws with different requirements from the FLSA.