Employment: FLSA Exemptions - Part One - Paying Your Employee on a "Salary Basis"
The Fair Labor Standards Act, known affectionately as the FLSA, is a federal law that establishes minimum wage, overtime pay, record keeping and child labor standards. The FLSA requires, among other things, that most employees be paid overtime pay at time and one-half the regular rate of pay for all hours worked over 40 in a workweek. There is, however, an exemption from the overtime pay requirements for employees who meet certain criteria. To qualify for the exemption, the job held by the employee must meet certain tests, and the employee must be paid on a salary basis at not less than $455 per week.
Although the requirements of the overtime exemption have been in place for many years, we continually see employers who do not fully understand them or apply the requirements incorrectly. In this series of articles, we'll remind you of what you can do, what you can't do, and how to dig yourself out of a hole when you find out you've been doing what you can't do.
First, the term "salary basis" reflects the concept of a guaranteed wage - that is, the employee must be paid a certain amount no matter how many hours the employee actually works. Any pay formula that results in a wage guaranty is sufficient. For example, a worker is a "salary basis" employee whether guaranteed a minimum weekly wage or guaranteed a certain number of work shifts which will produce a wage of that guaranteed amount.
With few exceptions (to be addressed next month), an exempt employee must receive a full salary for any week in which the employee performs any work, regardless of the number of days or hours actually worked. The exempt employee, however, is not entitled to be paid for any week in which the employee performs no work.
An employer may never deduct from pay for absences of an exempt employee occasioned by jury duty, attendance as a witness, or temporary military leave. The employer, however, may offset any amounts received by the employee as jury fees, witness fees, or military pay for a particular week against the salary due for that particular week without loss of the exemption.
An employer may never deduct from pay for absences occasioned by the employer or by the operating requirements of a business. If an exempt employee is ready, willing and able to work, deductions may not be made for time when work is not available. For example, an employer may not deduct from pay when the employer closes the business as a result of bad weather.
Next month we'll discuss the limited circumstances which allow an employer to make deductions from the pay of an exempt employee.
By Rebecca M. Fowler email@example.com