Two month ago, I started to answer a few readers questions about cutting hours and pay for exempt and non-exempt workers. I promised a second post of the subject: this is it.
Here are the questions I still need to answer:
"[…] can a person be determined exempt for the reason of “Professional” when he/she only works 10 months out of the year, furloughed for 8 weeks to go on unemployment benefits, then return to work?"
"[…Given the downturn in our business] our exempt and non-exempt employees would be willing to trim their hours from 40 hours to 32 hours per week (get paid for 32). Having said that, I wanted to verify if this would violate any FLSA benefits and/or rights for either classification (exempt or non-exempt)."
"I am an exempt employee; can my company strongly request that I volunteer to take 2 days off without pay in order to help meet the annual budget?"
These questions are basically the same; can salaried employees "ready, willing, and able to work" be paid less than their full salary? The simple answer would be no, but nothing is ever simple.
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Despite my mother’s wishes, I am still not a lawyer
See the previous post for caveats and sources; suffice to say, I am still not a lawyer, and this is still not legal advice.
See even earlier posts for the difference between exempt (hourly) and non-exempt (salaried) workers under Federal law, in particular the Fair Labor Standards Act (FLSA).
I will continue to ignore a few categories of exempt workers: government employees (exempt do not need to be paid during a budget required furlough), outside sales representatives (no minimum hourly wage or salary required), and teachers (no minimum hourly wage or salary, and no overtime requirements).
Hence “Susie Screwed”, who commented on my previous post, is aptly named. As a public university, her employer likely can declare budget required furloughs (time off without pay) to reduce expenses. Since she is a teacher, there is also no federal minimum hourly wage or overtime rate.
I hope she has a strong union or state labor laws. However, both are unlikely, since she is in the southeast, not a hot bed of labor law or unionism.
Her best backup plan is to eat cheese sandwiches and lentil soup; both are high in protein and low in cost.
10 Months per year for a salaried employee?
The first case, a professional exempt employee who is laid off for 2 months a year and collects unemployment, reminds me of British graduate students, at least as they were in the early 90’s.
Back then, every UK graduate student “went on the dole” for the summer, as a way to get paid during their summer holiday. I was jealous, since they got summers off, and money to live on.
Clearly, the company could fire the employee after 10 months, and the employee could go on unemployment. The odd feature is that this is recurring every year.
The actually arrangement definitely looks like it is pushing the limits of the “bona fide salary reduction”, due to economic conditions, allowed for exempt workers.
The Department of Labor opinions I can find appear to say that the minimum weekly salary still must be paid (currently $455/week), no matter how “short” the work week becomes. Hence if this person were paid 8 x $455 for the summer, and did not have to show up to work, that would be legal.
The gray zone is that the “ready, willing and able to work” clause requiring pay is in the same paragraph of the regulations that also say, “exempt employees need not be paid for any work week in which they perform no work.”
If the professional showed up at work and sat around for a few hours each week during the summer, the employer may obligated to pay at least the $455 minimum. If s/he never comes in, the employer can pay nothing.
This is related to taking weeks off “voluntarily”. That is the subject of the next questions.
Whether collecting unemployment during “voluntary” time off is legal under unemployment laws, I have no idea.
I am amazed how far companies go to avoid having to pay their employees overtime under FLSA. This is clearly a case where a non-exempt employee, paid an hourly wage, could simply not be paid for the summer.
Do you “volunteer” not to be paid?
The last two questions are about exempt workers agreeing not to work and not be paid.
The rule here is very clear: if, for the employee’s benefit, an employee does not work during a given week, the employer does not have to pay the salary for that week.
It is also clear that, if the employee is “ready, willing, and able to work” during a week, the employer must pay the full weekly salary, whether there is work to do or not.
However, what happens if the employer asks for “volunteers” to take time off without pay? This makes me think of the Sarge asking for “volunteers” for a suicide mission in a World War II movie. He usually looked someone in the eye, making it clear that soldier was supposed to volunteer.
An employer does not have to pay for time a worker is away for work for true “voluntary” time-off. For this kind of voluntary time off, particularly if there is a general time-off plan, pay can be reduced in daily increments.
As mentioned above, employers also do not have to pay for any week when no work is done.
The second case – reducing every exempt employee’s pay for the difference between a 40 and 32 hour work week – is likely legal, as long as the pay does not go below $455/week.
This doesn’t really have to do with voluntary time off. The employer could cut wages, and require the salaried workers to continue to work 40, 50 or even 70 hours a week, if that is what it took to do their jobs.
However, this employer is trying not to be a jerk, so is indicating they expect the employee will do 20% less work per week, usually by not working one day. This is likely fine.
For the third case – two days of unpaid time off to make the budget – likely is trouble for maintaining exempt status, even if the time off is voluntary. The lawyers at Davis Wright Tremaine recommend whole workweek “voluntary” time-off only.
The reason is simple: less than full week deductions of pay are only to be made when the time off was for the benefit of the employee – the employee asks for the time off for his/her own use.
When the employer requests the days off for business reasons, and the reduction in pay is less than a week, the notion that the employee is “salaried” (paid a fixed amount per week), is called into question, and with it the exempt status.
So it goes. The answers to the three questions are yes, yes, and no, but each answer has caveats. No wonder it is a good idea to consult a lawyer when trying to understand labor law.
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