If I had a quarter for every time I heard someone
criticize me for acting aloof at Starbucks by ordering a “medium” rather than a “grande” use the term “salaried-exempt,” I could play air hockey all day at Chuck-E-Cheese.
Hmm, that sounded less creepy in my head. But, seeing it typed out and all, yeah, sorry.
Anyway, Myth #1: Paying an employee a salary makes that person exempt from the Fair Labor Standards Act overtime rules. The rules that are set to change on December 1. In reality, salary is just one element of various common FLSA exemptions.
Another myth — or maybe just a mistake, but a costly one — is when employers deduct money from an employee’s salary.
Consider the recent federal court decision in Bennett v. Highland Graphics, Inc. (opinion here). In that case, the parties agreed that: (1) the plaintiff was paid enough salary each week to satisfy to requirements of both the administrative and executive exemptions; but (2) had amounts deducted from the his salary during five separate pay periods.
Defendants argued that the deductions were the result of cash flow issues. Is that cool? Well, no. The court concluded that, even if the deductions had nothing to do with the quantity or quality of the plaintiff’s work, the company may lose the benefit of the exemption in those weeks in which it deducted money from the plaintiff’s salary.
And without an exemption, an employee that works over 40 hours in a workweek, is owed overtime for that time worked over 40 hours.
So, when can you deduct money from an exempt employee’s salary?
Well, if you want to do that and maintain the exemption for that workweek, your options are limited.
The regulations contemplate five circumstances: (1) absenteeism, (2) certain sick leave/FMLA, (3) penalties imposed in good faith for infractions of safety rules, (4) unpaid disciplinary suspensions, and (5) certain mistaken overpayments.