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.
