Human Resources News & Insights

Answers to tricky HR questions: Cutting exempts working hours/pay

Our team of experts fields real-life, everyday questions from HR managers and gives practical answers that can be applied by any HR pro in the same situation. Today’s question: Some exempt employees want to work fewer hours. Will a pay cut violate the Fair Labor Standards Act? 

Question:
Some of our employees who are exempt under FLSA want to cut back their time from 40 hours a week to 35.

Can we decrease their pay by an amount proportionate the decrease in time? Or would that put us in violation of FLSA?

Answer:
No problem with decreasing their pay proportionately, says Caryn Pass, a labor attorney with Krupin O’Brien LLC.

Remind those employees, however, that if they cut back and then work extra time, they don’t get overtime pay for any time worked over 35 hours.

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  • Mary Galvez

    Keep in mind the federal minimum weekly wage a person can earn to be classified exempt is $455 / week. Make sure that decreasing pay doesn’t go below that level. Certain states can have even more stringent requirements. In New York, where we’re located, that minimum is $536.10 per week.

  • Flo

    Question!! Can an exempt empolyee’s pay be reduced for poor attendence

  • CeeCee

    Question

    If an employee is salaried, non-exempt and works less than 80 hours in a pay period, can they be paid for only time worked or must they receive pay for the full 80 hours?

  • Mary B

    To respond to CeeCee and Flo, I had a similar question recently, and was informed that you cannot reduce an exempt employee’s pay for being there less than the 80 hours. However, if your company offers vacation time, you can take those hours away from their vacation “bank”, reducing it by the number of hours they did not work. Thus, their paycheck is not reduced, but you don’t reward them for not being at work.

  • Sue

    To CeeCee – you can pay only for hours worked for a salaried non-exempt – key is “non-exempt”.

  • CeeCee

    I mis-stated my question. The employee is salaried, exempt and has exhausted all vacation and sick time. If they worked only 60 hours in a pay period, would we be required to still pay for 80 regular hours?

  • Sue D

    To answer CeeCee, I believe if there is a complete day missed, you can dock for that day. However, if the employee came in to work for 1/2 an hour and then went home, you must pay for that entire day. Were the 60 hours spread out over every day in the pay period or were there some whole days that were missed.

    Also, was the exempt employee answering e-mail or cell phone calls while home, sick? This may consistute as working part of the day. In that case, the exempt employee gets paid.

    Usually, the exempt employee is putting in additional hours over 40 per week, and available weekends on crunch projects. As an exempt employee, they are expected to put in as many hours as it takes to get the job done.

    Conversely, if they are out for a portion of a day due to circumstances and don’t have vacation/sick time to cover it, it shouldn’t be a problem to pay them.

    This is how I have always handled these situations, if this is not correct, someone please let us know :)

  • Mary B

    To quote directly from the Department of Labor web site:
    “14)
    Question: May an employer make deductions to an employee’s salary without jeopardizing the employee’s exempt status?
    Answer: Deductions from a guaranteed salary are allowed only in limited circumstances.
    Deductions from pay are permissible: when an exempt employee is absent from work for one or more full days for personal reasons other than sickness or disability, or is absent for one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness; to offset amounts employees receive as jury or witness fees, or for military pay; for penalties imposed in good faith for infractions of safety rules of major significance; or for unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions. Also, an employer is not required to pay the full salary in the initial or terminal week of employment, or for weeks in which an exempt employee takes unpaid leave under the Family and Medical Leave Act. § 541.602(b).”

    If the absence falls under FMLA, you may have your answer in the last sentence. As for partial day absences, the next question in the FAQ’s on the DOL web site, Sue D is right, you must pay them for the whole day, however, that pay can consist of vacation time off for partial day absences, even if they do not have any vacation leave accrued:

    “15)
    Question: May an employer take deductions from an employee’s leave bank for partial day absences?
    Yes. Employers may take partial day deductions from an employee’s leave bank, even if the deduction results in a negative leave balance; however, an employer may not dock an exempt employee’s salary for a partial day absence.
    Under the final rules, employers may take deductions from employees’ leave accounts for partial day absences, the same as under the old regulations. The preamble specifically states that “employers, without affecting their employees’ exempt status, may take deductions from accrued leave accounts….” 69 Fed. Reg. at 22178. The preamble also cites approvingly to a number of Wage and Hour Division opinion letters allowing deductions from accrued leave accounts. Additional opinion letters, dated December 4, 1998, May 27, 1999, and February 16, 2001, similarly provide that employers may reduce the amount of accrued paid leave in an employee’s Paid Time Off plan, even if the employee is absent only for a partial day. The employer may reduce the leave so that the employee has a negative leave balance. However, the employee must receive the full guaranteed salary, even if there is no leave in the account or there is a negative balance, if the employee has only a partial day absence.”

    Sorry this was so long, but it is a very complicated issue.

  • Sue D

    Great information Mary, and you’re right, it is a complicated issue.

    What concerns me more, is that the questions sounds more like a policy management problem than anything. Many companies wait until the employee is completely out of time, before mentioning that the employee is abusing the time off policy! If a company and an exempt employee are going to be at odds with a days pay, there is something else wrong here. Does the employee use excessive time off? Is the employee irresponsible? Poor performance? If the employee is a great employee, then something can be worked out, and I am sure the employee feels bad about taking the day. If other circumstances exist, they need to be addressed, and not disguised in an attendance problem.

  • Laurie

    California employer is deducting, one weeks paid vacation time that has accumulated by an exempt salaried employee. Example, salaried employee has 4 weeks per year. The deduction will eliminate one week from the original vacation time. This is being implemented because of the economy. This only effects the salaried employees and not the hourly. Can the employer legally do this?
    The vacation time is accumulated by the years worked.

  • Jeff M

    Hi,I have a few questions. I am a salaried employee working between 40-50 hrs/week in a restaurant. We have no vacation or sick time available.

    1. Can my employer cut my pay based on the number of shifts that I work?
    2. If they can, and I am working more than 40 hours/wk would they still have to pay my salary?
    3. If multiple manager are working and there is no way for me to get 40 hrs, does my employer have to pay my salary?

  • Bryan

    OK here’s my situation…

    I was offered an exempt position at 55k per year and started work at that job a month ago. Now, citing lack of sales and the poor economy, everyone (including me) has to take a 20 percent pay cut. They are telling us that we must take one unpaid day off per week, thus the 20 percent decrease in pay.

    I asked my boss which day of the week I should take off and he told me that I can only take a day off if it doesn’t interfere with the day to day support of our customer (I’m an on site technician).

    My question is this: Given the 4 day work week/ 20 percent pay cut plan outlined by my employer, do I have a right to insist on my 1 day off each week, or is that at the whim of my manager?

    Thanks for your help.

    Bryan

  • HR Mgr

    Jeff and Bryan,
    Are you considered to be a “Non-Exempt” employee or an “Exempt” employee? Remember, these are the key words.

  • Julie

    Can an employer force a salary paid employee who is exempt to take a week of unpaid time off? The employee and employer signed an agreement stating the employee will make a certain amount of money per year. They are not paid overtime ever. So is it legal to force this salary paid employee to take unpaid time off?

  • Maggie

    Jeff: Find out if you are considered exempt or non-exempt. If they are cutting your pay based on hours or shifts worked, then you are non-exempt. If they are reducing your salary based on hours and you are losing control of when you work and how you do your job, then you are non-exempt and they should be paying you hourly all along. They can call you manager but wage & hour looks at actual duties and how you are treated.

    Bryan: If you are truly exempt, it is up to you to get your job done for the salary that is paid. If they reduce you pay and you feel you can get the job done in 32 hours per week, then do it. Exempt employees do what needs to be done. You may be able to shorten your daily hours rather than take a day off each week so that your customers are covered.

    Julie: I know of an engineering firm that closed down the week of Christmas and New Years and told all employees they were taking it off unpaid even if they still had PTO, vacation or sick time banked.

  • Karen

    Hi, all-

    Slightly different scenario – I was hired to work p/t (32 hours per week) and am paid a salary originally determined by an hourly rate x 32 hours. The job title and work is considered exempt. Here’s the issue: if I work more than 32 hours a week I am not compensated, but if I work less I am docked pay as I am not given any paid leave time (0).

    I say I should be considered an hourly employee, my boss says I am a salaried exempt employee who is required to work the hours required to get the job completed no matter how long it takes and for no additional compensation or future adjustment of work hours.

    Thanks for your help!

  • Mary

    Your boss is wrong. If you are truly an exempt employee, you receive your salary no matter how many hours a week you work – whether less or more than 32. He can’t have it both ways. Either you’re salary/hourly and receive compensation for hours worked (including overtime for over 40) or you’re exempt. You would definitely have a claim under the FLSA.

  • Karen

    Thanks Mary! Just to clarify, is it overtime for over 40 or overtime if over 32 hours if I am salary/hourly?

  • Mary

    It’s overtime for over 40 hours – you would receive your regular hourly wage after 32 hours up to 40.

  • Kim P

    If I am truly an EXEMPT employee and my company is cutting hours from being paid 80 hours to being paid only 72 hours on your check each week and they are giving all non-exempt employees one day off to make-up for the missed hours and a few exempt employees in other departments are getting the one day off, but since I work in HR, my director said that we could not have the day off, that we are exempt and required to work no matter how many hours we are being paid. So on my check I am getting paid 72 hours but working 80 and sometimes more. Can they do this. I was hired in to work 80 hours at a specified rate and now only getting the 72 paid hours but working 80 and some.

  • Sue D

    What it sounds like to me is that the non-exempt employees are getting their hours cut, (thus reducing their pay), yet you are getting a pay cut. If you are truly an EXEMPT employee, you don’t get paid by the hour, you receive a salary, regardless of the number of hours you work. It sounds like they are reducing your salary, and are using an hourly calculation just to wrap their heads around a tangible number to work with.

    Yes, your employer can do this. They can cut pay if they want to, but what will happen is that they will be cutting morale and productivity as well. I am surprised that your director is turning away from this very important fact, and not allowing you the same “benefit” of the time off as the others.

    We reduced our pay by 20% (company wide) but we also reduced the work week for those employees who got the pay cut. It went a long way in retaining morale and producticity and loyalty to the company.

  • mkb

    Is it legal for the employer to take a 10% pay cut from all employees (exempt and no-exempt) and still make everyone work mandatory 40 hours (full time)?

  • Kim P

    I agree with Sue D. That it should be a company wide deal. They cut our hours and only let a pick and choose amount of employees have the reduced work week. I was told that a day off is a gift and that since I work in HR that we will set the example and not take a day off, but still only be paid 72 hours for working 80 or more in a two week period.

  • Sue D

    Hi Kim,

    It is legal to do what they are doing, but I also think it’s unreasonable. Your director should be the one having quite a bit of input on this. Have you had a discussion as to why you are all receiving a pay cut, while the others are not? If looked at in this way, it may open the discussion for flexibility. Also, it could appear to be discriminatory, if other certain factors surround the issue? Is everyone else male? Is the HR department female?

    Also, on the flip side of your bosses argueent about being exempt and working as many hours as necessary for the same pay, this goes with working less hours as well.

    If you are exempt, (and it sounds as if you are) it works both ways.

    Sue

  • Jeff Dowling

    An co-worker was given a 30% pay cut. His duties included some high tech duties that required special skills. He was given 20,000 more annually than the union contract required. He is a 10 yr employee. His co-worker who performs the same duties did not receive a cut. This employee has no disciplinary record. Should this pay cut been an negotiated item. Does he have an standing since the other employee did not receive a pay cut. Any comments?

  • Esme

    I am a non-exempt employee and have recently been told that I will have to be oncall on the weekends and that I would have to alternate with a co-worker. My job description states that I may need to work weekends and/or holidays; however, it does not state that I have to be oncall or on standby.

    Can a supervisor change a job description without me agreeing to it? Can I ask for compensation for being oncall on the weekends? If no compensation is granted, and I deny the additional responsibility could I loose my job? How will it affect me in my current position in the future?

  • Sue D

    Jeff,

    There are a lot of things that you did not say about your situation. Aside from a union contract, an employer can pretty much do what they want unless they are breaking some law. Is there a discrimination issue here at all; age, race, disability? Are they breaking any company policies? There were a few positions in my office that were cut more than 20% because of the high amount of pay they received, and one other in that department who received no cut. All the higher paid employees were brought to this employees base pay. Essentially, the same thing you are talking about. All the higher paid employees have been here longer.

    Yes, this is “legal” because the company did not break any laws or policies. Is it right? For the company to stay in business and continue to provide jobs for everyone, it was the right thing to do, and it had to be done.

    Unfortunately, many employees do not get to see the full extent of why a company makes the decisions it makes, an employee just has to trust the company.

    I agree that it is a hard situation, and may seem unfair on the surface, but there are probably good reasons for what they did.

  • Linda Bailey

    We are shutting down for 1 week in July, can we not pay our exempt associates and make them use vacation pay or file for unemployment?

  • Mary

    Yes, you can do either.

  • http://www.okcu.edu Liz Hedrick

    If we reduce exempt and non-exempt employee salaries by 2% (due to budget issues), but provide each employee with 5 days of personal leave, (which will be a new benefit) may we allow the exempt employees to take personal leave as they wish (by the day), rather than requiring them to take five full days at once?

  • Cristal

    I have a question: I am an exempt employee. My salary was cut by 20%, but the company also asked me to work less hours. I signed a Personnel Action Form (PAF) stating the change was temporary. How long can the salary cut be in effect? Can the company legally decide to make the cut salary permanent?

  • Mary

    The salary change can be in effect for as long at the company deems it necessary – as well they can make it permanent. The one thing I would make sure of if you are esxempt and your hours were cut – do you still meet the minimum pay threshold for an exempt worker? The federal minimum is $455 per week. In New York, the minimum is $536.10 per week. You should check if your state is different from the federal minimum. If your salary falls below that rate, you cannot be classified as exempt.

  • Ann

    Is it legal to make employees work 5 days with a 20% reduction in salary?

  • Kathy

    We have an exempt employee who has exhausted all PTO. If she takes a full day off, can we deduct this day from her pay? I believe that if she takes a partial day off, we cannot deduct, but a full day we can–

  • Sam

    I have a question, I am a SALARIED EXEMPT Human Resources Generalist and if anyone could explain this to me I would welcome it. I worked 5 out of the 7 hours I was supposed to and I was told that I needed to record 2 hours unpaid.
    On 9/8/09 my apartment was robbed and I was docked (I worked the rest of the week.
    On 11/6/09 I was out of the office due to a planned trip out of the country as well as on 11/9/09. Note that I worked the rest of the weeks (4 days each week.

    I have been docked a total of 23 hours and I wanted to know if my boss is violating the FMLA guidelines for salaried exempt employees, if so what can I do

  • Maggie

    Sam: Do you have any earned PTO, Vacation or Sick time that you can use to pay for this time off? If not, then only whole days may be unpaid. The two hours at the end of the day must be paid! If you do not have paid time off left or are too new to have any, then they can legally deduct the two whole days you were off. I personally would not deduct these two days because it send the wrong message. If your boss insists on docking you for the two hours, you can contact Wage and Hour to file a complaint. Your boss is treating you as an hourly employee, not an exempt employee. If you work over 40 hours in any weeks, ask him for overtime. He can’t have it both ways. You are either exempt or non-exempt. This can’t change each week or with each circumstance.

  • Sam

    Yes the fear of retaliation from my boss, by reporting it to DOL. I am not the only perosn in my office that this is happening to but while we were in a meeting with other centers in different states that we own she clearly stated to all HR persons that if an ee works 4 out of 5 days that we should not dock them for the day. I do have sick days left and no vacation days left and had to borrow from 2010 vacation time to cover what we call RCO (Reduced Center Operations) which means that the company will be closed for two or three days of a week and that the ee must use vacation time to cover the days that the office is closed so the ee will be paid for the whole week. Unfortunately next week the office will be closed November 23 to the 27th two days will be paid as they are company holidays which are the 26th and the 27th. That means that we who have no vacation days left will have to take unpaid days. This will also happen in December as well. If out other HR personnell does not dedcut from salaried Ee’s whyy does she. My thing is that when we as salaried ee come in early or are requested to stay somedays till 8 pm then she should compensate us fo that if she is deducting our time. Funny thing is that she is a payroll manager.

  • Ben

    I am an exempt salaried employee working as a manager of a retail site. My question is this: If I am asked to work in another location in (addition to working my regular schedule in my own location) as a clerk should i be paid a minimum wage for doing so, performing no managerial work, just helping out a fellow location than needs associate help.

    If not I will just shorten my work week by leaving early i guess.

    thanks,
    ben

  • Lorrie J

    An employee is asking for intermitten FMLA can we cut his pay for the hours he is here? Do we still have to pay him full salary if she is working 9-3 instead of 9-6. This will be for the next 60 days?
    DOL is very hard to understand and this employee is salary. I mean if he is here for 5 or 6 hours dont we have to pay the whole day? Yikes help. Thanks

  • JLH

    If an exempt employee is on intermittent FMLA, you can pay them on an hourly basis for any partial days worked. The DOL makes this exception and it does not jeopardize the employee’s exempt status.

  • Lana

    If an exempt employee uses 3hrs intermittent FMLA in the morning but stays 2hrs late in the afternoon, how many hours should be reported as FMLA (3 or 1)? How many hours must they be paid (5 or 7)? What if actual hours worked exceed 8 in a day (or 40 in a week)? May we ignore or refuse to acknowledge time worked outside those normally scheduled based on the employees exempt status or does their hourly pay basis require us to report actual hours worked?

  • JB

    I have the same question as Lana. Another example: If exempt employee takes 5hrs of FMLA on a Monday but by the end of week has made up the 5hrs do I still deduct 5hrs of FMLA for Monday or not?

  • Dog

    I am an exempt salaried employee – I voluntarily took a 20% pay cut and reduced my work week from 5 days to 4 days (20% or 40 hours to 32 hours) about three years ago. My employer is now telling me I have to go back to 5 days a week with no pay increase? I accepted the 20% decrease in pay to match the 20% decrease in work time. But do I have to accept a 20% increase in work time with no pay increase? Is this correct?

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