Labor Dept. to Revisit Advice on Stock Options as Part of Base Pay
The Labor Department agreed Wednesday to reconsider an advisory that employers should include the value of exercised options in the base pay of hourly employees--an interpretation that could boost overtime pay but imperil the future stock options of millions of workers.
At a meeting Wednesday with representatives from the LPA, a Washington-based organization representing more than 250 of the nation’s largest employers, officials from the Labor Department’s Wage and Hour Division said they would review an opinion letter sent last year that discussed how stock options should be treated under the Fair Labor Standards Act.
“We are encouraged that the department is willing to take another look at the broader issue,” said LPA General Counsel Dan Yager, who participated in the meeting.
The Labor Department has said the letter was intended as guidance for a single company, not as a broad policy statement. An opinion letter is not a regulation but is considered by most employment law experts as an indicator of how the Labor Department would rule in similar cases.
Labor Department officials did not respond to a request for comment on the meeting.
In the opinion letter, sent to an unnamed company, the Wage and Hour Division said that profits from stock options exercised by hourly employees must be considered part of their base wages and therefore would retroactively boost the overtime pay of those workers.
To qualify for the stock options, employees have to work for the company for three months. As a result, the options could not be considered a gift or part of a profit-sharing plan because they are tied to hours worked.
Because overtime is figured as a percentage of base pay, each hourly employee would be owed extra overtime after cashing in stock options, which is the right to buy stock at a fixed price.
Employer groups and congressional Republicans have demanded that the Labor Department withdraw the advisory letter, which became public in January.
Yager urged the Labor Department to act quickly and to consider supporting a legislative updating of the Fair Labor Standards Act.
