Volume 1, Issue 7
May 29, 2002
Question: Can an Employer Suspend a Salaried Employee Without Altering the Employee's Exempt Status Under Federal Wage and Hour Laws?
Recently, several clients have questioned whether they can place salaried employees on unpaid disciplinary suspensions. The primary concern is that unpaid suspensions would alter the employee's exempt status under the minimum wage and overtime provisions of the Fair Labor Standards Act ("FLSA"). Currently, the FLSA provides a complete minimum wage and overtime pay exemption for any employee serving in a bona fide executive, administrative, or professional capacity. According to the pertinent Department of Labor regulations, one important qualification for the exemption is that the employee be paid on a salaried basis.
The only type of deduction from an employee's salary contemplated by the Department of Labor regulations is one imposed as a penalty "in good faith for infractions of safety rules of major significance." As such, deductions from an exempt employee's salary for minor disciplinary infractions are not the kind of deductions permitted by the Regulations, and would generally defeat the exemption for an otherwise exempt employee.
However, the regulations do provide a "loophole" that does allow an employer to suspend a salaried employee without pay and still retain the employee's exempt status. Specifically, the Regulations state that an employee need not be paid for any workweek in which he or she performs no work. Therefore, the Department of Labor has continually advised that it is permissible to suspend a salaried employee for an entire week (or weeks) and not defeat the exemption.
In short, an employer may suspend a salaried employee without pay, provided that the suspension encompasses an entire week or weeks of work. It is only when an employer deducts a portion of an employee's weekly payment that the employer runs the risk of forfeiting the employee's exempt status.
Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.