Last month, EmployNews warned employers that certain furloughs or salary reductions made in response to business circumstances could threaten overtime exemptions for qualifying salaried employees. In late July, the Department of Labor’s Wage and Hour Division issued a “Frequently Asked Questions” guidance for employers on permissible and impermissible deductions.
The FAQ repeats the warning given to employers that deductions from the weekly salary for exempt employees will violate the exemption if they result from furloughs or other situations where the employee is available and able to work. However, the guidance states that employees who take a voluntary furlough will not lose their exempt status. The FAQ explains that the employer may deduct for full day absences as long as the decision to take a furlough is completely voluntary.
In another section, the FAQ confirms that employers may prospectively reduce the salary of an exempt employee in response to weak business circumstances. The guidance warns employers that such reduction must not operate as a “short-term, day-to-day, week-to-week deduction from the fixed salary” based on anticipated business circumstances. In other words, the salary should not be adjusted more than several times a year.
The FAQ guidance can be found at www.dol.gov/esa/whd/flsa/furloughfaq.pdf.