Trimming Exempt Employee’s Salaries?
August 7th, 2009
Companies face a lot of staffing decisions in a rough economy — which are often complicated by tough legal questions. For clarification, the Department of Labor (DOL) recently released a fact sheet on legally trimming exempt employees’ salaries and schedules.
Reducing salaries and hours for exempt employees can easily lead to FLSA violations. Here are the DOL’s answers to some of trickiest questions about legal staffing strategies during a slowdown:
1. Can we require exempt employees to take unpaid days off?
Only if it’s for a full week, the DOL says. Exempt employees must be paid for any week in which they perform any work — other than when a full day of pay is deducted because the employee took off for personal reasons.
But when the day off is the employer’s decision, pay can’t be deducted.
2. Can exempt employees volunteer to take time off without pay?
Employers can’t force exempt employees to take unpaid days off — but when it’s 100% voluntary, the DOL counts that as a “day off for personal reasons” and pay can be deducted in full-day increments.
3. Can we require exempt employees to use vacation time?
Yes, companies can deduct from an exempt employee’s leave bank for absences, even when it’s for less than a full day and the absence was mandated by the employer.
The tricky part: Exempt employees need to be paid a full salary in weeks in which they perform any work (except when a full day of pay is deducted when the employee is absent for personal reasons) — which means if someone’s leave bank is empty, pay cannot be deducted.
4. Can we just reduce exempt employees’ regular salary?
Yes — as long as salaries aren’t regularly changed to get around the salary basis requirement. What’s the difference? According to the DOL:
Allowable pay deductions involve “a prospective reduction in the predetermined pay to reflect long-term business needs,” rather than a “short-term, day-to-day or week-to-week deduction” based on how many hours employees work.
If you are thinking about trimming your Exempt Employee’s Salaries, then please contact Workforce Solutions, Inc to speak with our in-house legal counsel. This is a free service provided for clients of Workforce Solutions, Inc.