FLSA2009-3NA — Payment plan for nonexempt gasoline service station employees and section 7(f)

U.S. Department of Labor
Employment Standards Administration
Wage and Hour Division
Washington, D.C. 20210

FLSA2009-3NA

January 15, 2009

Dear Name*:

This is in response to your letter inquiring whether a proposed method of payment for
nonexempt, gasoline service station employees complies with the Fair Labor Standards
Act (FLSA) and the applicable regulations.
1
You state that you are seeking guidance
“because [you] wish to ease the burden of record keeping for the employer.” It is our
opinion that the proposed method of payment does not comply with section 7(f) of the
FLSA, 29 U.S.C. § 207(f), or with the regulations at 29 C.F.R. Part 778.

Your client owns a gasoline service station that employs automotive mechanics, gasoline
attendants, cashiers, tow truck drivers, and dispatchers for the tow truck drivers. You
specifically ask whether the following proposed method of payment accords with the
requirements of the FLSA. Employees receive a fixed weekly salary that exceeds the
minimum wage and includes compensation for overtime worked in excess of 40 hours
per week. Each employee would have a pay agreement with the gasoline service station
that provides as follows:

• Automotive mechanics working less than 60 hours per week (54, 56, and 52.5
hours over three weeks respectively) would receive $800 per week.
• Gasoline attendants and cashiers working less than 50 hours per week (48, 45, and
46 hours over three weeks respectively) would receive $375 per week.
• Tow truck drivers working less than 70 hours per week (65, 58, and 70 hours over
three weeks respectively) would receive $700 per week.
• Dispatchers for the tow truck drivers working less than 70 hours per week (65, 58,
and 70 hours over three weeks respectively) would receive $700 per week.

Section 7(f) of the FLSA, 29 U.S.C. § 207(f), provides an exception from the overtime
pay requirements of the Act for certain employees with duties necessitating irregular
hours of work. Specifically, the section 7(f) exception applies if there is an agreement to
provide a weekly guaranteed salary for no more than 60 hours at a regular rate of pay that
is not less than the applicable minimum wage and compensation at not less than one and
one-half times the regular rate of pay for all hours worked over 40 in a workweek.
2

Section 7(f) is the only provision of the FLSA that allows otherwise nonexempt
employees to receive the same amount of total compensation each week, regardless of the

1
Unless otherwise noted, any statutes, regulations, opinion letters, or other interpretive material cited in
this letter can be found at
www.wagehour.dol.gov.

2
Effective July 24, 2007, the Federal minimum wage increased from $5.15 an hour to $5.85 an hour. It
will further increase to $6.55 per hour effective July 24, 2008, and to $7.25 per hour effective July 24,
2009.

2
number of overtime hours worked (up to the maximum number of hours guaranteed in
the agreement, which may not exceed 60). This method of compensation is known as a
“Belo” plan. See Walling v. A.H. Belo Corp., 316 U.S. 624 (1942).

Thus, a Belo plan permits a fixed payment when the employee’s duties necessitate
irregular work hours and the total wages would vary widely from week to week if
computed on an hourly rate basis. See
29 C.F.R. § 778.404. But “[t]he nature of the
employee’s duties must be such that neither he nor his employer can either control or
anticipate with any degree of certainty the number of hours he must work from week to
week.”
29 C.F.R. § 778.405. In addition, the “duties must necessitate significant
variations in weekly hours of work both below and above the statutory weekly limit on
nonovertime hours.” Id. Irregularities caused by absences for reasons unrelated to the
nature of the duties being performed -- such as personal reasons, illness, vacations,
holidays, or scheduled days off -- do not satisfy the requirements for irregular hours of
work. See
Field Operations Handbook § 32g02; Wage and Hour Opinion Letter
September 15, 1997 (copy enclosed).

It is our opinion that the proposed method of payment does not comply with section 7(f)
of the FLSA or 29 C.F.R. Part 778. First, the information provided does not indicate that
the employees’ duties require irregular hours that the employer cannot reasonably
control. Second, you provided examples of hours worked that do not show that the
employees’ varying hours are ever less than the 40 hours per workweek standard of
section 7(a).
3
As noted supra, there must be variation not only in those hours worked
over 40 per week, but in those worked under 40 in a week as well. See 29 C.F.R.
§ 778.406 (“[W]here the fluctuations in an employee’s hours of work resulting from his
duties involve only overtime hours worked in excess of the statutory maximum hours, the
hours are not ‘irregular’ within the purport of section 7(f) and a payment plan lacking this
factor does not qualify for the exemption.”). Third, the proposed plan for tow truck
drivers and dispatchers is based on a weekly guaranteed salary for 70 hours (in the third
week of your proposed scenario), which exceeds the 60-hour maximum in the law. See
29 U.S.C. §
207(f); 29 C.F.R. § 778.411.

You also ask whether a Belo contract or agreement must be signed by the employees and
whether employers are required to keep track of the employees’ hours of work. Although
“it is certainly desirable” to do so, there is no requirement that the agreement be reduced
to writing so long as “the making of the contract and the settlement of its terms were
done in good faith.”
29 C.F.R. § 778.407. Employers who utilize section 7(f) are subject
to the FLSA recordkeeping requirements at 29 C.F.R. Part 516, including the requirement
to keep accurate records of the employees’ hours of work. They also must keep a copy of
the individual employee contract or collective bargaining agreement governing the plan,
“or where such contract or agreement is not in writing, a
written memorandum
summarizing its terms.”
29 C.F.R. § 516.24.

This opinion is based exclusively on the facts and circumstances described in your
request and is given based on your representation, express or implied, that you have

3
As indicated supra, you provided examples of an automotive mechanic working 54, 56, and 52.5 hours
per week; gas attendants and cashiers working 48, 45, and 46 hours per week; and tow truck drivers and
dispatchers working 65, 58, and 70 hours per week.

3
provided a full and fair description of all the facts and circumstances that would be
pertinent to our consideration of the question presented. Existence of any other factual or
historical background not contained in your letter might require a conclusion different
from the one expressed herein. You have represented that this opinion is not sought by a
party to pending private litigation concerning the issues addressed herein. You have also
represented that this opinion is not sought in connection with an investigation or litigation
between a client or firm and the Wage and Hour Division or the Department of Labor.

We trust that this letter is responsive to your inquiry.

Sincerely,

Monty Navarro
Office of Enforcement Policy
Fair Labor Standards Team

* Note: The actual name(s) was removed to preserve privacy in accordance with 5
U.S.C. § 552(b)(7).