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HR MATTERS E-TIPS
THIS WEEK'S E-TIP: FLSA Trap: Exemptions and Partial Day Absences
August 28, 2007, Volume 9, No. 35
Published by Personnel Policy Service, Inc.
"Your Policy and Compliance Experts Since 1972"
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THIS WEEK'S E-TIP: FLSA Trap: Exemptions and Partial Day Absences
The FLSA regulations make it clear that you cannot dock your exempt
employees' pay for absences of less than a day. But can you require
them to use paid leave for these partial day absences? Find out below
what the DOL and courts have to say about this issue and consider how
your exempt employees feel about this practice. |
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THIS WEEK'S E-TIP: FLSA Trap: Exemptions and Partial Day Absences
The Fair Labor Standards Act (FLSA) revised regulations
addressing
what jobs are exempt from the law's minimum wage and overtime
requirements have been in effect for a little over 3 years.
Those
regulations provided much-needed changes and guidance to the
exemptions, including an increase to the salary threshold and
clarification of the job duties requirements.
However, one hot-button topic the Department of Labor (DOL)
failed to
address is the conflict over the use of paid leave for exempt
employees'
partial day absences. (The regulations still prohibit employers
from
docking the pay of exempt employees for absences of less than a
day.
However, a few exceptions apply for infractions of safety rules
of major
significance, for certain disciplinary suspensions, for the
initial and
terminal weeks of employment, and for FMLA leave.)
A question arises when employers have policies requiring exempt
employees to use hours of paid vacation or sick time for partial
day
absences. These policies provide a way for employers to attempt
to
avoid docking pay and jeopardizing the exemption.
This approach can raise questions, though, about whether the
employee
is really being paid on a "salary basis," as required by the
FLSA's
regulations. Some courts and the DOL disagree about how the
requirement affects the employee's exempt status. And, from an
employee relations' perspective, the requirement can cause
exempt
employee ill will, particularly for those who consistently work
more than
40 hours a week without additional compensation.
The DOL's Position
The DOL, in its opinion letters, traditionally has permitted
vacation or sick
leave offsets as long as the exempt employee does not experience
a
reduction in compensation. So, according to the DOL, once an
employee is out of paid-time off, you may not make any partial
day
deductions. In the comments to the 2004 regulations, the agency
specifically restates this prior position outlined in its
opinion letters.
Several courts have adopted the DOL's position. For example, in
Webster v. Pub. Sch. Emples. of Wash., Inc., 247 F.3d 910 (9th
Cir.
2001), the Ninth Circuit determined that an employer can make
deductions for partial day absences from an exempt employee's
leave
bank. According to the court, leave time is not considered
salary, even
when the leave can be paid out as cash at termination.
Similarly, in
Schaefer v. Ind. Mich. Power Co., 358 F.3d 394 (6th Cir. 2004),
the court
acknowledged that exempt status is affected only by monetary
deductions for work absences and not by non-monetary deductions
from
fringe benefits such as personal or sick time. |
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Some Courts Disagree, Creating Uncertainty
However, a few courts have disagreed. They have determined that this
practice, even without an actual loss of pay, treats the exempt
employee
like an hourly, nonexempt employee and, therefore, triggers loss of
the
exempt status.
For example, in Klein v. Rush-Presbyterian-St. Luke's Med. Ctr., 990
F.2d 279 (7th Cir. 1993), the Seventh Circuit determined that a
private
employer improperly categorized employees as "professional." The
employer had established a compensatory time "bank" based on
overtime hours from which employees had to draw when working less
than eight hours per day. The court ruled against the employer even
though the employees never were actually docked if their banks had a
negative balance.
In addition, some state laws may impose different requirements for
docking leave banks. For example, Washington employers may make
deductions from leave banks in partial day increments (but for at
least
one hour) only on the express or implied request of the exempt
employee for time off from work.
As a result of this disagreement between the courts and the DOL, and
since state laws may vary, employers still will be caught in the
middle on
this issue. Accordingly, if you are a private employer and require
exempt
employees to use paid leave for absences of less than a day, you
should
consult legal counsel.
(Note that special rules apply for exempt public employees and allow
them to be considered exempt even if their pay is reduced for
partial day
absences as the result of a pay system that meets certain
requirements.
These rules are discussed in the FLSA regulations at 29 C.F.R.
§541.710.)
Employee Relations Issues Complicate Matter
As a practical matter, though, even if you are in a jurisdiction
that allows
use of paid leave for partial day absences, you may find that exempt
employees resent this offset, particularly if they regularly work
more than
40 hours per week. In such a situation, they are not entitled to
additional
pay when they put in long hours, but are required to use vacation or
sick
leave if they need a few hours off.
If your concern is that your exempt employees may abuse their status
by
leaving work early or coming in late, address those issues as a
separate
matter. For example, discipline exempt employees who do not complete
their work or who are not available when needed. In other words, do
not
penalize all your exempt employees just because of the possible
abuses
of a few. |
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Subscribers to the
Personnel Policy Manual and HR Policy Answers on
can find more information on the FLSA exemptions in Hours of Work,
Chapter 207, notes 24 through 30, and on the FLSA and the salary
basis
test for exempts in Hours of Work, Chapter 207, note 32.
Not a subscriber? If you would like to order one of our policy
chapters,
go to:
http://www.hrpolicyanswers.com.
If you have any questions, please call us at 1-800-437-3735. We'll
be
happy to help you. |
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Information provided in HR Matters E-Tips is researched and reviewed
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law attorneys. However, it is not intended as legal advice. Readers are
encouraged to seek appropriate legal or other professional advice.
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