Cutting salaries and adjusting work schedules for exempt and non-exempt employees just got easier, thanks to the Department of Labor.

The agency just answered the most frequently asked questions that have arisen when employers require employees to take furloughs and take reductions in pay and/or hours worked.

Here’s how to safely handle the six biggest challenges employers face:

Exempt employees

Q. Can an employer reduce an exempt employee’s salary due to a slowdown in business?

A. Yes. There’s nothing prohibiting employers from reducing salary, provided the change is not used to evade the salary basis requirements.

A salary reduction won’t cause a loss of exemption as long as it’s not related to the quantity or quality of work performed and the employee still receives a salary of at least $455 per week.

Caution: Deductions based on day-to-day or week-to-week determinations of work load are not allowed and would cause a loss of exemption.

In other words, reductions must reflect long-term business needs, not short-term goals.

Q. Can an employer reduce the leave of a salaried exempt employee when there’s an absence due to a lack of work?

A. Yes. If an employer directs an exempt employee to take a day off because of a lack of work, the employer can reduce the employee’s accrued leave (or run a negative leave balance), even if the absence is less than a full day.

The employee must still be paid his or her full salary in any week in which work is performed, even if the employee has no leave left.

Q. Can a salaried exempt employee volunteer to take time off work due to a lack of work?

A. Yes — and salary deductions can be made if an employee takes time off. But the employer must seek volunteers to take time off due to insufficient work, and the employee must volunteer to take time off for personal reasons other than sickness or disability.

Caution: To avoid a loss of exemption, the employee’s decision must be completely voluntary.

Non-exempt employees

Q. If an employer is having trouble meeting payroll, does it need to pay non-exempt employees on the regular payday?

A. Yes. Failure to do so constitutes a violation of the Fair Labor Standards Act (FLSA).

However, if the correct amount of overtime compensation can’t be determined until sometime after the regular pay period, FLSA will be satisfied if it’s paid as soon after the pay period as is practicable.

Q. Is it legal for an employer to reduce the wages or number of hours of an hourly employee?

A. Yes. The FLSA doesn’t prohibit employers from reducing the number of hours non-exempt employees are scheduled to work or lowering their regular hourly rate, as long as they are paid the minimum wage.

Q. Does an employer need to pay an hourly employee for a full day of work if he or she was scheduled for a full day but only worked a partial day due to a lack of work?

A. No. The FLSA doesn’t require employers to pay non-exempt employees for hours they didn’t work.

Info: Click here to view the DOL’s entire FAQ document on furloughs and pay reductions.

Wage and hour lawsuits are cropping up by the dozens these days — even in industries you’d least suspect.

Four female workers filed a suit against their company, claiming they were denied overtime pay.

Nothing out of the ordinary here — except that the employees were exotic dancers at clubs that offered “topless” or “totally nude entertainment.”

The nightclub said it didn’t have to pay the strippers overtime or minimum wage because their work fell under the “creative professional” exemption of the Fair Labor Standards Act. In other words, the company claimed the dancers’ primary duty was “the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.”

That would be the “artistic endeavor” of dancing with no clothes on.

The dancers, on the other hand, were not so quick to identify their craft as art and sued for back wages.

Where did the court stand on this debate? Unfortunately, we won’t know just yet. Before the case could be heard, the judge dismissed it.

Why? The strippers filed the suit pseudonymously under the name “4 Exotic Dancers” — and the judge wouldn’t let the case proceed until the strippers publicly identified themselves.

The dancers were afraid they’d be retaliated against by the nightclubs they were suing in the form of harassment, termination and blacklisting. They also felt they’d be stigmatized if their identities were revealed publicly.

Courts do occasionally allow plaintiffs to testify under pseudonyms if it’s necessary to protect the person from injury or harassment.

Tough luck for the exotic dancers though — the court said that even though the strippers may “suffer some embarrassment or economic harm,” it’s not enough to warrant pseudonymity here. If they wish to file again, they’ll have to do it under their real names.

Still, what’s the lesson from this titillating case? Double-check who you’re classifying as exempt or non-exempt — problems can crop up where you least expect.

Cite: 4 Exotic Dancers v. Spearmint Rhino, et al., U.S. Dist. Ct. C.D. Cal, No. CV 08-4038 ABC (SSx)

The agency has proposed $1.7 billion for what it calls “worker protection” programs. That’s a 10% increase over the dollars designated for those programs in FY 2009, and the highest it’s been since FY 2001.

A big chunk of the money is earmarked for unemployment benefits and workers comp, but here’s where a lot of the rest is going:

• The Wage and Hour Division will receive $228 million, an increase of $35 million from the prior year, including funding to hire 200 new investigators. That signals greater focus on compliance with the Fair Labor Standards Act — meaning more investigations to ensure employees are properly classified as exempt and nonexempt for overtime purposes. Division investigators will also be looking at compliance with minimum-wage laws.
• $564 million will go to the department’s Occupational Safety and Health Administration. That’s $51 million more than  in FY 2009. Some of the money will go to hire 160 new OSHA enforcement staff, many of whom will be bilingual to communicate with immigrant workers when investigations are held.

The case — Galdames, et al. v. N & D Investment Corp. – was heard in Miami, and involved two plaintiffs who worked for a Miami commercial laundry They were looking to sue their employer for overtime pay and damages.

The laundry company argued that the U.S. Supreme Court, in Hoffman Plastic Compounds, Inc. v. N.L.R.B., ruled that illegal aliens couldn’t sue in U.S. courts under the Fair Labor Standard Act.

The Hoffman Plastic case involved an undocumented Mexican worker who had fraudulently used a birth certificate belonging to a friend born in Texas to get a job at a factory in California. He was fired after he tried to organize a union at his workplace. The National Labor Relations Board (NLRB) found that the termination had violated the NLRA and ordered backpay and other relief. However, the Supreme Court, in a 5-4 ruling, concluded that the Immigration Reform and Control Act of 1986, which makes it unlawful for employees to use fraudulent documents to establish employment eligibility, erased the awarding backpay to an undocumented alien who had never been authorized to work legally in the United States.

Different rules
The judge said “no.” The FLSA rules are different from labor-relations rules, and apply no matter what the worker’s legal status is.

The judge’s decision is in line with the majority of state and federal court decisions that have considered the question of FLSA rights for undocumented workers.

Bottom line: Even if an employer unknowingly hires an illegal alien, the worker can use the employer for overtime pay and damages.

Now’s the time to do a last-minute check on your I-9 procedures, before the February 2 deadline.

The first Monday in February is the day you’ll have to complete a new, revised I-9 form for all new hires and for reverification of some employees who have temporary work authorization. Pay special attention to three procedures associated with the new form:

• All documents presented during the verification process will now have to be unexpired. Previously, certain expired documents, such as a U.S. passport,  were acceptable.
• There’s a change in the acceptable “List A” identity and employment authorization documentation. You can no longer accept Form I-688, Temporary Resident Card; Form I-688A, Employment Authorization Card; or Form I-688B, Employment Authorization Card. They will all be obsolete on February 2.
• Added to the acceptable documentation for “List A” are: foreign passports containing certain machine-readable immigrant visas and passports from the Federated States of Micronesia and the Republic of the Marshall Islands if presented with an I-94 or I-94A arrival/departure record.

Starting February 2, the new I-9 form should be available at  www.uscis.gov/files/form/I-9.pdf. Or you can call the U.S. Citizenship and Immigration Services at 1-800-375-5283.

Note: The new form should not be used for existing employees. It must be used only for new hires and for reverification of current employees who only have temporary work authorization upon expiration of that authorization.

The four-page Opinion Letter 2008-7NA came in response to an employer that asked about how to account for overtime when a nonexempt employee works through scheduled breaks or puts in extra time that isn’t recorded on time sheets or cards.

Here’s a summary of the major questions and DOL’s responses:

Q: Our company policy is that nonexempt employees must record the periods when they put in extra hours, such as when they work through meal breaks. What if an employee works through mandated meal breaks but but ignores policy by failing to record the time worked. Are we on the hook for figuring and paying OT, even though the employee broke the rules?

A: Yes, you must pay OT. The Opinion Letter notes that, under the Fair Labor Standards Act (FLSA), it’s ultimately the employer’s responsibility to keep track of the time and, if necessary, prevent employees from working through breaks and piling up OT. Just having a policy doesn’t let the employer off the hook for paying OT.

Q: Can we require that employees notify managers before working through meal breaks, so that managers can approve and approve OT? And would we be exempted from paying OT if an employee failed to notify a manager?

A: You can have an in-house requirement and discipline employees who don’t follow the policy, but you still must pay OT, whether or not the employees notifed the managers.

Note: DOL Opinion Letters don’t carry the weight of law nor are they used to cite precedents. But they do show trends and tendencies DOL has regarding individual rulings. 

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.

Question:
We generally understand the new FLSA regs governing who’s eligible for overtime and who isn’t. But how do we know if our state has a set of laws different from – and maybe more strict than – the federal FLSA regs?

Answer
Courtesy of employment-law attorney Michael Faillace, here’s a list of states that follow only the federal Fair Labor Standards Act:

• Alabama
• Arizona
• Delaware
• District of Columbia
• Florida
• Georgia
• Idaho
• Indiana
• Iowa
• Kansas
• Lousiana
• Maine
• Massachusetts
• Michigan
• Mississippi
• Missouri
• Nebraska
• Nevada
• New Hampshire
• New Mexico
• New York
• North Carolina
• Ohio
• Oklahoma
• Rhode Island
• South Carolina
• South Dakota
• Texas
• Utah
• Vermont
• Virginia
• Wyoming

If you’re not on that list, check with your state Department of Labor to get the special statewide regulations governing eligibility for overtime. Note: Although state regs may differ from federal regs, the state cannot issue rules that lessen the benefits for employees.

Hardly anyone can be certain about complying with all the provisions of the Fair Labor Standards Act relating to overtime and white-collar exemptions. But you can adopt good policies that protect your company from penalties if someone does make a compliance blunder.

The federal government calls them “safe harbor” policies, meaning there’s a good chance auditors will let you off the hook with just a warning if you’ve followed the policies but have misclassified a worker or made improper deductions from the worker’s pay. If you don’t have such policies, you could be subject to fines, damage payments and reclassification of workers, making them eligible for OT pay.

Generally, the FLSA states that you can escape penalties if you:

• Have a “clearly communicated” policy prohibiting improper deductions and a system under which employees can file in-house complaints about improper deductions
• Reimburse employees for improper deductions, and
• Make a good-faith effort to comply after discovering mistakes.

However, the question remains: What are “good policies”?

The law firm of Jackson Lewis provides two – one as a general policy and the other for fluctuating workweeks.

Companies can:

• adopt the two
• use them as guides for customizing or formulating policies,
• or compare them with existing policies to make sure you’ve covered all the bases.

Question

Do we have to pay employees who are on jury duty? Should they get full pay for the whole time they serve?

Answer

Let’s begin the answer by talking about exempt employees, explains Jane Dalton, an employment-law attorney with Duane Morris LLP.

The FLSA says any exempt employee who works part of a week and spends another part of the week on jury duty must be paid for the full week.

For all other employees and for exempts who spend at least a full week on jury duty, the law varies from state to state.

Some say employees must be paid for a minimum number of days. Most states permit the employer to deduct from pay any amount the employee receives for serving on jury duty.

Check with your state department of labor to learn the limits and requirements in your state.