Applying Wage and Hour Laws to the 21st Century Series: Concerns Involving Exempt Employees

In this, our final post in this blog series on wage and hour issues in the 21st century, we address another frequent area of concern for employers: exempt employees.

Smartphones and electronic remote access are creating new problems for employers when it comes to exempt employees. Under the Fair Labor Standards Act (FLSA), white collar exempt employees must be paid a guaranteed weekly salary in excess of $455 per week. The guaranteed salary must be paid during any week in which the employee performs any compensable work, and the salary is not subject to deductions based on quality or quantity of work. The regulations to the FLSA recognize five specific situations where deductions can be made from an exempt employee’s pay. Those five recognized deductions include the following:

  1. Deductions from pay may be made for absences of one or more full days for personal reasons other than sickness or disability.
  2. Deductions from pay may be made for absences of one or more full days occasioned by sickness or disability in accordance with a bona fide policy or practice of providing compensation for such sickness or disability.
  3. Deductions from pay may be made for penalties imposed in good faith for infractions of safety rules of major significance (partial day deductions allowed).
  4. Deductions from pay of exempt employees may be made for disciplinary suspensions of one or more full days imposed in good faith for infractions of workplace conduct rules.
  5. An exempt employee on leave under the Family and Medical Leave Act (FMLA) only has to be paid a pro rata part of the full salary for the time actually worked.

Employers should use caution when taking deductions from exempt employees’ pay under the five reasons set forth above—particularly if the exempt employee will be performing compensable work during these absences. A growing number of issues are being raised by exempt employees who are having their pay deducted while they are out on FMLA or sick days and are working remotely from home. If employers want to deduct from an exempt employee’s guaranteed salary for absences caused by one or more of the five exceptions set forth above, employers need to have clear policies in place instructing exempt employees that they are prohibited from performing any work during such absence.

An employer’s failure to have strong policies in place and to enforce those policies can lead to situations where employers jeopardize the exempt status through improper deductions. For example, if an employee is taking intermittent FMLA leave and is absent two days a week for chemotherapy treatment, an employer may lawfully pay the employee three fifths of the exempt employee’s salary for that week. However, if the exempt employee is performing compensable work remotely from home either on their laptop computer or other device during the two days off, the employee is performing compensable work and thus is not absent from work for a full day absence. In those situations, the employer has made improper deductions from the exempt employee’s pay.

This can be particularly troublesome when exempt employees are out on an FMLA block leave of absence. If an exempt employee is out on an unpaid FMLA leave but is performing work remotely from his or her home while on leave, the employee should be paid his or her guaranteed salary while on leave or the employee should be converted to hourly status during the FMLA leave, and the employee should be paid on an hourly basis for all time actually worked. If an employer does not want to have to pay exempt employees who are taking FMLA leave, the employer needs to instruct the employee that he or she is prohibited from performing any compensable work duties while on FMLA leave. One available method to ensure that this does not happen is to make it clear to the employee going out on FMLA leave that his or her job responsibilities will be handled by other employees (specifically named) during the FMLA leave. Explaining the process for coverage while the employee is out on FMLA leave along with an instruction that the employee is prohibited from performing any compensable work while on leave should help insulate an employer from a possible FLSA claim.

Cynthia A. Bremer is the managing shareholder of the Minneapolis office of Ogletree Deakins, and Charles E. McDonald, III is a shareholder in the Greenville office of Ogletree Deakins.