The U.S. Department of Labor has some handy legal advice for employers who are considering furloughs, layoffs or pay cuts.
DOL recently issued a document — “Frequently Asked Questions Regarding Furloughs and Other Reductions in Pay and Hours Worked Issues” — that’s designed to guide employers around the FLSA hassles associated with cutting a workforce or lowering wages.
Some of the issues covered:
- Q: If we’re having trouble meeting payroll, do we need to pay nonexempt employees on the regular payday?
In general, an employer must pay covered nonexempt employees the full minimum wage and any statutory overtime due on the regularly scheduled pay day for the workweek in question. Failure to do so constitutes a violation of the FLSA. When the correct amount of overtime compensation cannot be determined until sometime after the regular pay period, however, the requirements of the FLSA will be satisfied if the employer pays the excess overtime compensation as soon after the regular pay period as is practicable.
- Q: Is it legal for an us to reduce the wages or number of hours of an hourly employee?
The FLSA requires that all covered nonexempt employees receive at least the applicable Federal minimum wage for all hours worked. In a week in which employees work overtime, they must receive their regular rate of pay and overtime pay at a rate not less than one and one-half times the regular rate of pay for all overtime hours. The Act does not preclude an employer from lowering an employee’s hourly rate, provided the rate paid is at least the minimum wage, or from reducing the number of hours the employee is scheduled to work.
- Q: Do we 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 lack of work?
The FLSA does not require employers to pay non-exempt employees for hours they did not work.
- Q: In general, can we reduce an otherwise exempt employee’s salary due to a slowdown in business?
Reductions in the predetermined salary of an employee who is exempt under Part 541 of the Department of Labor’s regulations will ordinarily cause a loss of the exemption. Such an employee must then be paid at least the minimum wage and overtime required by the FLSA, as discussed above. In some circumstances, however, a prospective reduction in salary may not cause a loss of the exemption. Section 13(a)(1) of the FLSA exempts from minimum wage and overtime pay “any employee employed in a bona fide executive, administrative, or professional capacity” as defined in 29 C.F.R. 541. An employee qualifies for exemption if the duties and salary tests are met. FLSA section 13(a)(1) requires payment of at least $455 per week on a “salary” basis for those employed as exempt executive, administrative, or professional employees.
A salary is a predetermined amount constituting all or part of the employee’s compensation, which is not subject to reduction because of variations in the quality or quantity of the work performed.
An employer must pay an exempt employee the full predetermined salary amount “free and clear” for any week in which the employee performs any work without regard to the number of days or hours worked. However, there is no requirement that the predetermined salary be paid if the employee performs no work for an entire workweek. Deductions may not be made from the employee’s predetermined salary for absences occasioned by the employer or by the operating requirements of the business. If the employee is ready, willing, and able to work, deductions may not be made for time when work is not available. Salary deductions are generally not permissible if the employee works less than a full day. Except for certain limited exceptions found in 29 C.F.R. 541.602(b)(1)-(7), salary deductions result in loss of the section 13(a)(1) exemption.
To see the full document, in PDF format, and all 11 FLSA-related FAQs, go here.