A DANGEROUS MISUNDERSTANDING
Are "Exempt" Employees Entitled to Work Part-time for Full Salary? A little information is a dangerous thing. Have you heard the true story about the supervisory accountant who thought he was entitled to full salary for working only 10 minutes a day? He had recently been promoted to the Assistant Controller job in a large manufacturing firm. When the CFO tried to coach him about excessive tardiness and unexplained absences in the middle of the day, he threatened her with a lawsuit. He said, "It's known fact that you can't dock exempt employee pay for partial-day absences. In fact, as an exempt employee, you have to pay me for any week I do any work!"
The CFO asked the HR Executive, "Is there a change in the law I don't know about?" The HR Exec assured her that the Assistant Controller clearly qualifies for Fair Labor Standards Act exemption. He supervises at least 2 employees, manages a work unit, carries significant authority, and is paid on a "salary basis". But that doesn't mean he can work part-time and still draw full salary! They were both perplexed at why the employee was taking such a preposterous stance.
In talking with the Assistant Controller, the HR Exec learned where this bizarre interpretation of employee rights originated. "I read the government website," said the employee. "It says you can't reduce my pay for variations in the quantity or quality of my work. That makes it my right."
The regulation is intended to explain how a salary must operate to make an Executive, Professional, Administrative job "Exempt" from overtime:
… a "salary basis" means an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis. The predetermined amount cannot be reduced because of variations in the quality or quantity of the employee‟s work. Subject to exceptions listed below, an exempt employee must receive the full salary for any week in which the employee performs any work, regardless of the number of days or hours worked. Exempt employees do not need to be paid for any workweek in which they perform no work. (continued…)
The HR Exec explained that this just means some forms of salary docking could result in non-exempt status if the reasons fail the "salary basis". Employers are free to make even executive jobs non-exempt, as long overtime is paid for hours worked over 40 in a week. This causes neither cost nor consequence in this case since the employee already works short hours! (Note: loss of exemption may also hit other workers in the same job class, not an issue in this case.) The employee's obligation to perform well in return for pay is not changed.
The employee was unconvinced, even when shown how employers may "dock" a salary when the employee is: "absent from work for one or more full days for personal reasons other than sickness or disability" or "for unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions." These are not limits on the discipline an employer may apply, just clarifications on how pay docking may be used as a disciplinary measure under the salary basis. Still, biased assumptions die hard. The employee grew more adamant and filed a formal grievance against the HR department and the CFO for violating his rights under the FLSA.
His attendance over the next few weeks ranged from 10 minutes to 4 hours a day. Key tasks went unfulfilled, and the morale of other employees plummeted as their "manager" worked short hours for full salary while they had to work to earn theirs.
In due course, the employee was warned that performance and professional work habits are required as a condition of employment for all staff, and refusal would be considered constructive resignation from his job, misconduct and insubordination. Only after his employment terminated did he realize that he had no case.
Sound crazy? Human Resources practitioners are often flabbergasted at the unique and far-fetched positions some employees take based on inadequate understanding of employment regulations. Employers have significant freedom to:
Reduce the amount of a salary rate as long as it is at least minimum wage and does not violate the "salary basis".
Convert exempt employees to hourly status, treating them as eligible for overtime and paying only for time worked.
Expect good performance and work habits and set consequences for failure.
BEST HR PRACTICE to prevent such problems AND promote your mission:
1. EDUCATE Employees in their first "Exempt" assignment.
2. ASK what "Exempt" employment means to them. Address any misconceptions.
3. Use the Fair Labor Standards Act "EMPLOYEE RIGHTS" poster. http://www.dol.gov/whd/regs/compliance/posters/minwagebw.pdf
4. Explain "exemption". To exempt a job from overtime it must: a. meet a "Duties Test": http://www.dol.gov/whd/regs/compliance/fairpay/main.htm b. be paid on a "Salary Basis: http://www.dol.gov/whd/regs/compliance/fairpay/fs17g_salary.htm
5. Explain that:
a. Exempt means no right to overtime pay or "comp time." There is no such thing as "comp-time" anyway.
b. They are entering a new realm. As with owners and senior managers, there is no limit to the hours of work expected in return for their salary. Their skill and past performance has brought them to this milestone in their career. Rewards and advancement go to those who perform.
c. Exempt status comes with some "perks", such as occasional schedule flexibility, as long as they "Lead by Example" with excellent communication and work habits, pursue the organization‟ mission with zeal, and gets results. Just when you think some things are so basic they don't‟ need explaining, you realize that people need your leadership in unexpected ways.
Bill Sweigert, SPHR 509.777.2658 1206 N Lincoln Ste 200, Spokane, WA 99201 Since 1910 - 100 years Supporting Management Leadership ~ Employee & Labor Relations ~ Human Resources & Management Consulting ~ Health & Safety ~ Workplace Compliance