The Salary Requirement For FLSA Overtime Exemptions
There are two primary requirements for employees to be considered exempt and not entitled to overtime under the Fair Labor Stadards Act’s (FLSA) overtime provisions, such as the executive, administrative, and professional exemptions. First, the employee usually must be paid a bona fide salary. Second, the employee must have a certain amount of exempt job duties. Let’s look at the salary basis requirement that must be met for most FLSA overtime exemptions.
To qualify for an FLSA overtime exemption, most employees must be paid at least $684 per week on a salary basis. That salary requirement doesn’t apply to outside sales employees, teachers, and employees practicing law or medicine. Exempt computer employees may be paid at least $684 on a salary basis or on an hourly basis at a rate not less than $27.63 an hour.
“Salary basis” means that the employee regularly receives a predetermined amount of compensation every pay period on at least a weekly basis. That predetermined amount must not be reduced because of variations in the quantity of the employee’s work. With few exceptions, an exempt employee must receive the employee’s full salary for any week in which the employee performs any work, regardless of the number of days or hours worked. The salary basis requirement isn’t met if the employer reduces the employee’s predetermined salary because of the employer’s operating requirements. If the employee is ready, willing, and able to work, deductions may not be made for time when work is not available.
There are a few exceptions to the above requirements that allow employers to reduce a salary payment without forfeiting the employee’s salary status:
When an employee is absent from work for one or more full days for personal reasons other than sickness or disability.
For absences of 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.
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.
Violation of the FLSA’s salary basis requirement can have significant consequences for an employer that’s classified its salaried employees as exempt and not eligible for overtime. The employees will not be considered exempt if the employer has an “actual practice” of making improper salary deductions. Several factors are reviewed when determining whether an employer has an actual practice of making improper salary deductions, including:
The number of improper deductions, particularly as compared to the number of employee infractions warranting deductions.
The time period during which the employer made improper deductions.
The number and geographic location of both the employees whose salary was improperly reduced and the managers responsible.
Whether the employer has a clearly communicated policy permitting or prohibiting improper deductions.
If an “actual practice” of impermissible salary deductions exists, the exemption is forfeited during the time period of the deductions for employees in the same job classification working for the same managers responsible for the improper deductions. Isolated or inadvertent improper salary deductions will not result in loss of the exemption if the employer reimburses the employee for the improper deductions.
Please don’t hesitate to contact us if you have questions about your employer’s overtime practices.