Part Two: What the DOL Just Clarified About FLSA Exemptions and Bonus Pay

 

On January 5, 2026, the U.S. Department of Labor’s Wage and Hour Division issued six opinion letters addressing a range of FMLA and FLSA issues. This post – part two of a three-part series – focuses on two FLSA letters that address problems employers often assume they have already resolved.

One letter deals with exempt classifications that appear sound based on job duties but unravel because of how the employee is paid. The other addresses bonus programs that feel discretionary until overtime calculations say otherwise.

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TL;DR: An employee can satisfy the learned professional duties test and still be properly classified as non-exempt if the pay structure fails the salary-basis rules. And bonuses tied to known criteria almost always belong in the regular rate for overtime purposes.

📄 Read the opinion letters via the Department of Labor press release.

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You Can Meet the Duties Test and Still Lose the Exemption

This letter addresses a licensed clinical social worker who believed she continued to qualify as an exempt learned professional even after her employer restructured her role.

WHD agreed that the employee’s clinical duties still required advanced, specialized knowledge. The elimination of supervisory responsibilities did not change that analysis – because supervision is not what makes a role a learned professional.

That conclusion, however, did not resolve the exemption question.

The employee’s pay structure had changed from salary to hourly. That shift alone was likely enough to defeat the exemption, even though her duties remained the same. The learned professional exemption turns on both what an employee does and how the employee is paid.

The letter then underscores a point employers often miss – and sometimes resist. Even when an employee satisfies every element of an FLSA exemption, the employer is not required to apply it. The Act prohibits misclassifying non-exempt employees as exempt. It does not require employers to classify employees as exempt simply because they could.

In other words, exemptions are permissive, not mandatory. Employers may classify employees as non-exempt and pay overtime as a matter of business judgment, risk tolerance, or administrative simplicity. Choosing the conservative path is not a violation. It is expressly allowed by the statute.

If the Bonus Is Earned, It’s Probably in the Regular Rate

The second letter addresses whether certain incentive bonuses may be excluded from the regular rate of pay.

The bonuses at issue were tied to specific, predetermined criteria – including attendance, safety, compliance, and performance benchmarks. Employees knew in advance what they needed to do to earn them.

That framing mattered.

WHD explained that once a bonus is announced in advance and earned by meeting known standards, it is not discretionary under the FLSA. Labeling a bonus “discretionary” does not make it so. And when a bonus is not discretionary, it generally must be included in the regular rate of pay.

That inclusion directly affects overtime calculations. If the bonus is excluded improperly, the overtime premium is wrong.

This isn’t a technical trap. It’s a common disconnect employers see when incentive programs are created without accounting for overtime math.

What Employers Should Take From This

• Exempt status depends on both duties and pay structure – changing one can undo the other.
• Employers may classify employees as non-exempt even when an exemption could apply.
• Bonuses tied to known, objective criteria are rarely discretionary for FLSA purposes.
• Incentive programs should be evaluated with overtime calculations in mind, not in isolation.

Bottom Line

Nothing here rewrites the FLSA. The letters simply illustrate how familiar missteps keep creating avoidable exposure.