On January 5, 2018, the United States Department of Labor reissued its Opinion Letter as an official statement of its Wage and Hour Division (WHD) policy and ruling towards calculations of salary deductions for compliance of the federal Fair Labor Standards Act (FLSA) by employers.
Under the FLSA, certain “white collar” employees who are employed in a bona-fide executive, administrative, or professional capacity and are paid on a salary basis at no less than $455 per week are exempt from overtime requirements. The appendant regulations further provide that to satisfy the salary basis test, it must show that an employee “regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed.” 29 C.F.R. § 541.602(a).
What Does this Mean for Employers?
This does not mean exempt employees must be paid for days on which they do not come to work. Rather, “deductions may be made when an exempt employee is absent from work for one or more full days for personal reasons, other than sickness or disability.” 29 C.F.R. § 541.602(b)(1). That is, if an exempt employee is absent for two full days for personal reasons, the employer may deduct the employee’s salary for the two full-day absences. If the employee is absent for one and a half days, the employer can deduct only for the one-full day absence. Further, an exempt employee’s salary may be deducted “for absences of one or more full days occasioned by sickness or disability (including work-related accidents) if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for loss of salary occasioned by such sickness or disability,” in which case “deductions for such full-day absences also may be made before the employee has qualified under the plan, policy or practice, and after the employee has exhausted the leave allowance thereunder.” 29 C.F.R. § 541.602(b)(2).
Deductions for Exempt Employees
While such deductions for FLSA exempt employees may be allowed, the Opinion Letter emphasizes that the regulations do not permit salary deductions for partial day absences. In other words, the regulations prohibit deductions from an employee’s guaranteed salary for absences that are less than one full day in duration. Conversely, if the absence is for one full day, the regulations do not prohibit a deduction equivalent to a partial day salary. Thus, if the absence is one full day in duration, the employer may deduct one full day’s pay or less.
Finally, the Opinion Letter explains that when taking a permissible deduction, an “employer may use the hourly or daily equivalent of the employee’s full weekly salary or any other amount proportional to the time actually missed by the employee.” 29 C.F.R. § 541.602(c). Therefore, if an employee is absent from a shift scheduled to be shorter or longer than the employee’s regular shift, the employer may take a deduction in proportion to the number of hours missed, provided that the employee is absent for less than one full day of work, no deductions are allowed.
Image link: https://pixabay.com/en/office-startup-business-home-office-594132/