We all know that under the Fair Labor Standards Act there are two kinds of employees: Exempt and non-exempt. And we all know that generally non-exempt employees are paid on an hourly basis and get overtime. We also know, or we should that you can’t just decide to make an employee exempt from overtime by paying them a salary. To be exempt the Employee has to meet both a duties test and be paid on a salaried basis. We spend a lot of time talking about the duties test with clients. For example, is the employee a bona fide executive, professional or administrative employee? The salaried basis test seems to get lost in the shuffle. So let’s talk a second about the salaried basis test.
According to the regulations, to meet the salaried basis test, your employee has to “receive each pay period . . . a predetermined amount . . . which is not subject to reduction because of variations in the quality or quantity of the work performed.” The regulations go on to say “Subject to the exceptions provided in paragraph (b) of this section, an exempt employee must receive the full salary for any week in which the employee performs any work without regard to the number of days of hours worked.”
Hold it just a second, what do you mean EXCEPTIONS PROVIDED IN PARAGRAPH (b)? That’s right, there are exceptions. Wouldn’t be a very good rule if there were no exceptions now would it? So what are these exceptions you ask? Well let me just tell you. You can make a deduction from a salaried employee’s pay for:
(1) Absences of one or more full days for personal reasons, not sickness (NOT ½ DAYS, FULL DAYS, so if the employee is out for a day and a half you can only deduct for the full day);
(2) Absences of one or more full days for sickness, if you have a sick pay plan that replaces the pay;
(3) Off sets (not full day deductions) for amounts received for jury duty, military leave or attendance as a witness;
(4) Penalties imposed in good faith for infractions of safety rules of MAJOR SIGNIFICANCE (one of the examples given is smoking in the explosives plant);
(5) Unpaid disciplinary suspensions of one or more full days imposed in good faith for infractions of workplace conduct rules in accordance with a WRITTEN POLICY APPLICABLE TO ALL EMPLOYEES;
(6) Time not worked in the first or last week of employment;
(7) Time not worked when an employee is on FMLA LEAVE.
OK, now before you get all worked up, let me throw in this caution. You mess these up and take an improper deduction and you get the exciting privilege of paying your now non-exempt employee for overtime and you also get to pay everyone else in that job classification working for the same manager for their overtime. Plus, you will get the fun and exciting opportunity to experience first hand a wage hour audit. Ok, it’s not fun or exciting. So, before you do any of this CALL YOUR LAWYER.