Best Ohio Wage and Hour Attorney Answer: Can my employer reduce salaried employees’ pay for missing work? What should I do about wage theft? If an employer wrongfully deducts from a salary employee is the employee now considered hourly?
Most salaried employees believe that because they are “salaried” that means they are not entitled to overtime compensation for hours worked over 40 in a week. Our wage and hour attorneys have blogged about this overtime and wage theft issue before (See As An Assistant Manager Should I Get Overtime Pay? I Need A Lawyer!, Can My Employer Refuse To Pay Me For Hours I Did Not Record On My Time Card? I Need A Lawyer!, and My Employer Is Not Paying Me For All Of The Time I Work. I Need A Lawyer!).
Today, our overtime law lawyers address the fact that must most employees and employers are unaware of what actually constitutes a “salary” under the law. Indeed, one thing that commonly undermines an employee’s status as “salaried” is if the employer makes deductions from the employee’s wages. If an employer improperly deducts wages from a so-called salaried employee, that employee will have a very good argument that he or she is no longer an exempt employee, which means that such employee would be entitled to overtime pay for the hours that he or she works beyond forty. And, this does not apply just in the week that the employer deducted the hours from the employee’s paycheck.
But what types of deductions are okay versus not okay?
An employee will be considered to be paid on a salary basis if he or she “regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed.” See 29 C.F.R. § 541.602(a). Deductions may be made, however, when the employee is absent from work for one or more full days for personal reasons, other than sickness or disability. See 29 C.F.R. § 541.602(b)(1).
For example, if an employee is absent for two full days to deal with personal matters, the employee’s “salaried” status will not be affected if deductions are made from the salary for two full-day absences. However, If an exempt employee is absent for one and one-half days for personal reasons, the employer may deduct only for the one full-day absence.
Deductions from salary may also be made for absences of one or more full days occasioned by sickness, disability and/or work-related accidents, if the deductions are made “in accordance with a bona fide plan, policy or practice of providing compensation for loss of salary occasioned by such sickness or disability.” See 29 C.F.R. § 541.602(b)(2). Thus, if the employer’s plan provides compensation for such absences, deductions for absences of one or more full days because of sickness or disability “may be made before the employee has qualified under the plan, policy or practice, and after the employee has exhausted the leave allowance thereunder.”
Deductions from an employee’s guaranteed salary for absences may only be taken under section 541.602(a) if the employee misses one or more full days of work. Importantly, the regulations do not permit salary deductions for partial day absences. However, if the absence is for one full day, the regulations do not prohibit a deduction equivalent to a partial day salary. The regulations only prohibit deductions from an employee’s guaranteed salary for absences that are less than one full day in duration.
So what happens if your employer cuts your pay because you were an hour late to work? Well, as a result of that cut, you are probably no longer a salaried employee or exempt. If you work over 40 hours that week, the next week, or any week thereafter, you would be entitled to overtime pay at time and a half for all the time past the 40 hours.
The case of Miller v. TEAM GO FIGURE, LLP provides a good example. In this overtime lawsuit, the United States District Court for the Northern District of Texas held:
The FLSA’s overtime provision mandates that “no employer shall employ any of his employees . . . for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed.” 29 U.S.C. § 207(a)(1). Pursuant to 29 U.S.C. § 213(a), a covered employer need not provide overtime pay to “any employee employed in a bona fide executive, administrative, or professional capacity . . . or in the capacity of outside salesman . . . .” 29 U.S.C. § 213(a); see Tyler v. Union Oil Co. of Cal., 304 F.3d 379, 402 (5th Cir. 2002) (employees who are classified as “exempt” are not entitled to overtime pay). The burden of proving that the employee is exempt from coverage rests with the employer. Corning Glass Works v. Brennan, 417 U.S. 188, 196-97 (1974); Tyler, 304 F.3d at 402. In light of the FLSA’s broad remedial aims, “[t]hese exemptions are construed narrowly against the employer[.]” Tyler, 304 F.3d at 402. Exempt status will be limited to those employees “plainly and unmistakably” falling within the “terms and spirit[]” of the exemptions. Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392 (1960). …
This is important because it means that it is up to the employer to prove that the employee is exempt and that it does not have to pay overtime. Moreover, the wage and hour law, as cited by the court, makes it very clear that this is not an easy burden for an employer to meet when trying to block overtime pay. The court then went on to apply the facts of that case to these overtime laws:
Miller argues that TGF has failed to meet its burden of proving she was paid on a “salary basis” since it improperly deducted amounts from her paychecks. For an employee to be considered paid on a “salary basis,” an employee must “regularly receive[] each pay period on a weekly or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of work performed.” 29 C.F.R. § 541.602(a). Section 541.602(b) provides, generally, that deductions may be made for absentee-ism, sick leave (in certain circumstances), penalties imposed in good faith for infractions of safety rules, unpaid disciplinary suspensions, and . . . for mistaken overpayments.” 29 C.F.R. § 541.602(b).
Miller provides undisputed evidence that from September 1, 2011 through October 15, 2011, and the pay periods ending on November 15, 2011 and April 16, 2012, TGF made deductions from her paychecks totaling $7,400.00. … TGF labeled the deductions as “payroll advances,” even though no payroll advance was made. … TGF deducted the amounts from Miller’s paychecks for an alleged debt that Eskridge claimed Miller’s husband’s company owed TGF. … When Miller complained about the payroll deductions she was told words to the effect that “if she didn’t like it, she could leave.” …
TGF does not dispute that deductions were made from Miller’s paychecks, but argues any deductions were “isolated,” and that “TGF has reimbursed any alleged `improper deductions’ and, therefore, such deductions do not impact the salary-basis element of Miller’s exempt status.” … The Court disagrees.
TGF’s own payroll summary reflects that TGF deducted the amount of $7,400.00 from Miller’s paychecks. … Evidence shows that TGF deducted the amounts from Miller’s paychecks, notwithstanding her protests, for an alleged debt that Eskridge claimed Miller’s husband’s company owed TGF. … section 541.602(b), which lists the permissible exceptions to the rule regarding deductions, does not list or contemplate a deduction to repay an alleged debt owed by the employee’s spouse’s corporation. See 29 C.F.R. § 541.602(b).
In a nutshell, TGF has failed to meet its burden of proving that Miller meets the salary basis test necessary for her exempt status. See Tyler, 304 F.3d at 402 (the burden of proving that the employee is exempt from coverage rests with the employer). As already stated, exemptions to overtime pay are affirmative defenses and “[t]hese exemptions are construed narrowly against the employer[.]” See id. Exempt status will be limited to those employees “plainly and unmistakably” falling within the “terms and spirit[]” of the exemptions. Arnold, 361 U.S. at 392 (1960).
If you believe that your employer is not paying you all of your wages for all of your lawfully earned overtime compensation at a rate of one and half times your normal wages as requires under the Federal Fair Labor Standards Act or Ohio Minimum Fair Wage Standards laws or you are an nonexempt employee that has been misclassified as exempt or independent contractor, contact the attorneys at Spitz, The Employee’s Law Firm today for a free and confidential initial consultation. The wage and hour lawyers at Spitz, The Employee’s Law Firm will provide you with the best options for your overtime pay dispute situation. If you even think that you may be entitled to overtime pay that you are not being paid, call 866-797-6040.
Disclaimer:
The materials available at the top of this overtime, wage and hour web page and at this employment law website are for informational purposes only and not for the purpose of providing legal advice. If you are still asking, “Am I entitled to overtime?”, “Does my job have to pay me for …”, “My paycheck is not right…” or “What do I do if…”, the your best option is to contact an Ohio overtime attorney to obtain advice with respect to FLSA questions or any particular employment law issue. Use and access to this employment law website or any of the links contained within the site do not create an attorney-client relationship. The legal opinions expressed at the top of this page or through this site are the opinions of the individual lawyer and may not reflect the opinions of Spitz, The Employee’s Law Firm, Brian Spitz, or any individual attorney.