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Interaction with the FLSA

Here is another one from Malaina.

Fair warning: this post will likely not be thrilling. I mean, c’mon, as lawyers, we’re paid to be boring and accurate, not to write you the latest page-turner! And while I really do try to spice things up for you every once in a while, this regulation in particular is just one of those most of us would rather not look at. Ever. However, as an employer, it should hopefully offer you some valuable guidance for handling intermittent or reduced schedule leave all while maintaining compliance with the Fair Labor Standards Act. This act, also known as the FLSA for short, interacts with and at times bumps up against FMLA policy. And as boring as it may be, what we’re about to cover is something you should be aware of.

Today, the interaction we’re going to focus on in particular is an employee’s exempt status under the FLSA, and we’re going to discuss how to ensure that an employee retains his or her exempt status even during FMLA intermittent or reduced schedule leave. But before we can get to that point, we have to first understand what it means to be “exempt” under the FLSA.

Being exempt under the FLSA means that you are exempt from minimum wage and overtime pay requirements. The most typical exemptions would be for executive, administrative, or other professional positions. These exempt individuals, rather than receiving hourly wages, receive a salary. Now, there are other hoops to jump through to qualify for one of these exemptions, but that is largely outside of the scope of this blog post. You simply need to know that some employees are exempt under the FLSA and that the goal for you as the employer is to keep them that way, even during FMLA leave.

So, how to make that happen? We start with this first premise:

(a) Leave taken under the FMLA may be unpaid. If an employee is otherwise exempt from minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA) . . . providing unpaid FMLA-qualifying leave to such an employee will not cause the employee to lose the FLSA exemption.

29 CFR §825.206(a).

Simple enough. Now, to understand this next part, we need to briefly discuss one of those FLSA hoops I (conveniently) skipped over earlier. The FLSA requires exempt employees to receive at least a fixed salary each week, with only certain very limited deductions to qualify as exempt. Yet, if someone is going on FMLA leave that is unpaid they are not getting their salary. Rather than lose their exempt status, however, the regulations provide that:

(a) [T]he employer may make deductions from the employee’s salary for any hours taken as intermittent or reduced FMLA leave within a workweek, without affecting the exempt status of the employee.

29 CFR §825.206(a).

Awesome and practical: the law for once makes some sense! FMLA reduced schedule or intermittent leave is by its nature, temporary. So we allow temporary adjustments to an employee’s pay without permanent repercussions to an employee’s exempt status under the FLSA.

But there is, of course, more. Sometimes, employees may be paid according to the “fluctuating workweek method of payment for overtime.” As a refresher, that is a provision that essentially allows the employee to take home a fixed salary each week (even though actual hours worked in the week might vary), and then to receive overtime pay at one half their hourly rate for any extra hours worked.

How does this interact with the FMLA differently? Basically, the answer is this:

(b) For an employee paid in accordance with the fluctuating workweek method of payment for overtime, the employer, during the period in which intermittent or reduced schedule FMLA leave is scheduled to be taken, may compensate an employee on an hourly basis and pay only for the hours the employee works, including time and one-half the employee’s regular rate for overtime hours.

29 CFR §825.206(b).

Let’s break that down just a little bit. Essentially, the employer can, rather than paying the employee a salary, start to instead pay the employee on an hourly basis during their FMLA reduced schedule or intermittent leave. The employer must do this during the entire time in which the employee is taking the leave, and the provisions also indicate that the employer must, if he chooses to follow this policy, use it uniformly for all employees paid according to the fluctuating workweek method. Essentially, this means that as the employer, you can’t just pick and choose when to apply this and when not to; you must be consistent. But an important thing to note:

(b) If an employer does not elect to convert the employee’s compensation to hourly pay, no deduction may be taken for FMLA leave absences.

29 CFR §825.206(b).

If this sounds like the ultimate legal “gotcha” you’re probably right. On the one hand you don’t have to convert to paying the fluctuating workweek employee on an hourly basis . . . but if you don’t, you have to continue to pay the employee their full salary without taking any deductions for the leave. I think we can all guess what most employers will choose to do on that one.

Last but not least, this portion of the Code of Federal Regulations ends with the reminder that all of these provisions only apply to FMLA-eligible leave and FMLA-eligible workplaces. If you need help, just remember: if the leave doesn’t qualify as FMLA leave, you can’t do any of this fancy finagling we’ve just discussed. If you do that, you risk forfeiting the exempt status of your employees under the FLSA or the employee’s eligibility for the fluctuating workweek method of payment.