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How Mandatory Time Off Can Impact Exempt Status

By Carol Rovello, SPHR

Many organizations are trying to keep current employees while reducing labor costs. You may be exploring alternatives to layoffs, including shutdowns, reduced work hours, and involuntary furloughs. Recognizing the Fair Labor Standards Act's strict limitations on "docking" the pay of exempt employees, you may be wondering how you can institute these cost saving strategies without eroding the classification of your exempt employees.

The US Department of Labor has issued recent opinion letters to address this specific question. It upholds the strict "docking" limitations imposed by the Fair Labor Standards Act (FLSA).

According to the DOL opinion letters, there are three acceptable actions with respect to "mandatory time off." They include:

  1. Requiring exempt employees to take a full week off without pay. The regulations provide that exempt employees "need not be paid for any workweek in which they perform no work."

  2. Making a permanent change in the exempt employee's workweek schedule, which reduces the salary to an amount that still meets the minimum of $455 per week.

  3. Refusing to pay for an employee's completely voluntary decision to take time off (for personal reasons not related to the company's operating requirements). Be careful with this one, though, to be sure that the employee is truly initiating this time off.

Keep in mind that you can require exempt employees to take accrued paid time off during slow periods. You just can't dock their pay if they don't have the accrued time and they have worked at all during the week.

For more information regarding how to protect exempt status, CLICK HERE.

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Carol Rovello is the President of Strategic Workplace Solutions. She helps organizations align human resource initiatives with business operations, anticipate and resolve HR challenges, and institute the structure needed to support organizational change.

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