It depends…..If an employer reduces an employees’ salary, because they don’t show up for work…..employers must take precautions to avoid breaking the law. The first question to ask: Is the employee an exempt or non-exempt? It does matter!
If the employee is non-exempt (hourly) they must be paid for their actual hours worked. These employees are paid an hourly rate and covered by minimum wage and overtime rules. It is legal and appropriate to dock pay if they don’t fulfill a 40 hour workweek. Additionally, this same non-exempt employee is entitled to overtime if they work over 40 hours within the same workweek. Non-exempt (hourly) employees are much easier to adjust pay as needed based on their actual hours worked.
If the employee is exempt (salaried), the situation is much more complicated. Exempt employees are protected from having their pay docked for hours missed (from work) under most circumstances. Exempt (salary) employees being paid on a “salary basis” means an employee regularly receives a predetermined amount of compensation each pay period. The predetermined amount cannot be reduced because of variations in the quality or quantity of the employee’s work.
Under the federal Fair Labor Standards Act (FLSA), employers must pay regardless of how many or how few hours the employee works per week. For example: if the exempt employee works 60 hours per week, he or she is not entitled to overtime. If the exempt employee works 20 or 30 hours per week, he or she must still be paid the full weekly salary. An exempt employee must receive the full salary for any week in which the employee performs any work, regardless of the number of days or hours worked. Exempt employees do not need to be paid for any workweek in which they perform no work.
The only time an employer can reduce an exempt salary is when one of the following occurs:
- Applied to an entire group or class of employees
- Not directly tied to a reduction in hours
If an employer temporarily reduces an exempt employee’s salary when business is slow, this can change the exempt status of everyone in that job. For this reason, the employer should always present the salary reduction to employees as permanent. There should be no promise or suggestion that the salary reduction is only temporary. The salary reduction needs to remain in effect for a minimum of 3 months.
Applying the salary reduction to only one employee can also change their exempt status. Taking the time to learn about wage deductions will help resolve problems down the road, should an exempt employee ever challenge their status and claim overtime, or an hourly employee allege discrimination. The safest course of action is not to reduce the number of hours when salary is reduced. In some cases, the courts have ruled that when both salaries and hours are reduced, it changes the employees’ exempt status. In the worst possible scenario, employers have been required to pay the workers overtime for the past 3 years.
A little more about us:
Susan Arnold, owner and lead HR Consultant at HR On-Call, LLC. Susan has 20+ years of HR experience and provides a HR presence to business organizations without the overhead expense of a full-time employee. Susan helps business owners improve employer/employee relationships and allows them to focus on their business while resting assured that they are in full compliance with state and federal law.
Areas of expertise:
- Reduce Employer Risk and Liability
- Customized Employee Handbooks
- Performance Reviews
- Improve Employee/Employer Relationships
- Background Checks
- Personality Assessments
- Guaranteed EEO Compliance
- Employee Retention
- Recruitment / Hiring
- Employee Discipline/Discharge
Susan is passionate about her customers and listens to their needs. If you are interested in any of the details above or would like more information about her services, please contact Susan!