*By Michele L. Jakubs
Salary reductions or voluntary furloughs are increasingly popular for
employers facing economic hardship. However, the Fair Labor Standards
Act (the “Act”) imposes statutory requirements related to salary
reductions and furloughs dependent upon an employee’s non-exempt or
exempt status. Under the Act, an employer may reduce a non-exempt
employee’s hourly wage and/or scheduled hours so long as the employer
pays the minimum wage and statutory overtime due for all hours worked.
Implementing salary reductions or furloughs for exempt
employees implicates more complex statutory requirements. Employers
implementing these programs have greater considerations. For example,
reducing an exempt employee’s salary to less than $455 per week changes
the employee’s exempt status to non-exempt. Once an employee is
non-exempt, the employer must pay minimum wage and statutory overtime
due for all hours worked. In addition, an employer who decides to
utilize furloughs in an effort to reduce costs must place its exempt
employees on furlough for the entire workweek. If an exempt employee
performs any work in a workweek, then the employee must receive his/her
full salary for that week. As a result, exempt employees selected for a
furlough cannot perform any work, including the most basic work
functions such as checking work email from a blackberry or home computer
or taking a work related phone call. Employers must pay employees for
the furlough week if the employee performs even such basic work
functions.
Because of the complexities associated with salary reductions
and furloughs, the Department of Labor (“DOL”) just issued an FAQ to
assist employers in navigating this potential minefield. Employers may
review the DOL’s FAQ at http://www.dol.gov/esa/WHD/flsa/FurloughFAQ.pdf.
*Michele L. Jakubs practices in all areas
of employment litigation and wage and hour compliance and
administration. For more information concerning the Fair Labor Standards
Act or any other employment issue, please contact Michele at
216.696.4441 or mlj@zrlaw.com.
