Tuesday, July 7, 2009

Right Staffing and Preserving Exemption

Yesterday I discussed supervisors and need to meet certain criteria in order to maintain an exemption from overtime. One reader aptly pointed out that paying on a "salary basis" means that an employee regularly receives each pay period a fixed, predetermined amount of money (of at least $455 per week) for every workweek in which the person performs any work. The U.S. Labor Department rules provide that, with some exceptions, the salary amount cannot be reduced based on the number of hours or days the employee works. And, the employee's salary may not be docked for absences during a workweek caused by the employer or by the organization's operating needs.

More and more, companies are looking to save money on labor costs while at the same time retaining valuable employees. Some companies have elected to reduce employee hours, work days or workweeks. Other companies have resorted to furloughs.

An employer can reduce an exempt employee's salary (temporarily or otherwise) on a going-forward basis, which can be made a part of a shortened work schedule. To meet the exemption rules, the employee's salary must be at least $455 per week and must still be paid per the "salary basis" rules, meaning that the lower salary could only be docked per those rules, which would not include days off in a workweek due to shutdowns.

Also, a salary does not need be paid for any workweek in which the exempt employee performs no work. If the employee is furloughed for one or more entire workweeks, then the "salary basis" rules do not require that she be paid any of the salary.

Be mindful that in order to preserve the exemption under these scenarios, the company should not allow an employee to take work home, handle matters remotely, by telephone, to perform duties from outside the office, etc. The relevant time period is the seven-day workweek the employer has established and documented for the employees as is required under the FLSA; this does not necessarily have to be a standard calendar week.

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