The federal Department of Labor (DOL) recently issued a new fact sheet entitled “Frequently Asked Questions Regarding Furloughs and Other Reductions in Pay and Hours Worked Issues.” While the fact sheet contains no new law or interpretation, in these economic times, it is extremely helpful for employers to have the DOL’s prior guidance on these issues consolidated in one sheet.
The fact sheet is set out in a question-and-answer format that is easy to follow. It addresses the following questions:
- If an employer is having trouble meeting payroll, do they need to pay non-exempt employees on the regular payday? Answer: Yes.
- Is it legal for an employer to reduce the wages or number of hours of an hourly employee? Answer: Yes, so long as the minimum wage and overtime provisions are met.
- Does an employer need to pay an hourly employee for a full day of work if he or she was scheduled for a full day but only worked a partial day due to lack of work? Answer: No.
- In general, can an employer reduce an otherwise exempt employee’s salary due to a slowdown in business? Answer: It seems to depend on what you mean. The fact sheet interprets this as a deduction for lack of hours worked. That is prohibited by the FLSA. Keep in mind, however, that employers are typically free to prospectively reduce an exempt employee’s overall compensation so long as the salary basis test and threshold is met.
- Can an employer reduce the leave of a salaried exempt employee? Answer: Yes. Be careful when making any deductions from pay. Also keep in mind that, under Ohio law, accrued leave is the same as earned wages – it is not advisable under state law to “take away” leave that has already accrued.
- Can a salaried exempt employee volunteer to take time off due to lack of work? Answer: Yes, which would allow the employer to deduct for a full day’s absence. Proving that the employee truly “volunteered,” however, may be next to impossible. This option should be resorted to only with great caution.
- Can an employer make prospective reductions in pay for a salaried exempt employee due to the economic downturn? Answer: Yes. See Question 4.
- Can an employee still be on-call or performing work at home during a furlough day? Answer: Employees who perform part or all of their normal job duties during a furlough day are working and are entitled to appropriate compensation.