Exempt Employees Salary Reduction Regulations
February 4th, 2009 Posted by AmeliaOne of the hottest HR topics right now is salary reductions for exempt employees. Many employers are faced with a choice of laying off employees, or using other tactics to reduce payroll.
When employers reduce exempt employees’ salaries, they must take certain precautions to avoid breaking the law.
One option to reduce payroll is to reduce hours for hourly employees. By having every hourly employee work 36 hours per week rather than 40 hours per week, an employer can reduce his or her payroll expenses by 10%. (In many cases, however, the cost of benefits remains constant.)
However, that solution won’t work for salaried exempt employees. Under the federal Fair Labor Standards Act Fair Labor Standards Act, or FLSA, employers must pay an exempt employee his or her full weekly wage, regardless of how many or how few hours the employee works per week. If the exempt employee works 60 hours per week, he or she is not entitled to overtime. However, if the exempt employee works 20 or 30 hours per week, he or she must still be paid the full weekly salary.
This raises a question for employers. Is there any legal way to reduce an exempt employee’s salary? The answer is “yes.” Under certain circumstances, an exempt employee’s salary can be reduced, according to the U.S. Department of Labor.
In order for the exempt employee’s salary reduction to be defensible, it should be:
- Permanent
- Applied to an entire group or class of employees
- Not directly tied to a reduction in hours
If an employer temporarily reduces an exempt employee’s salary when business is slow, this can change the exempt status of everyone in that job. For this reason, the employer should always present the salary reduction to employees as permanent. There should be no promise or suggestion that the salary reduction is only temporary. The salary reduction needs to remain in effect for a minimum of 3 months.
Applying the salary reduction to only one or a few exempt employees can also change their exempt status. Ideally, the company would reduce salaries for exempt employees by the same percentage, across the board. If that is not possible, everyone with the same job should have a similar salary reduction.
Reducing hours for exempt employees when salary is reduced is a grey area. The safest course of action is for the employer not to reduce the number of hours when salary is reduced. In some cases, the courts have ruled that when both salaries and hours are reduced, it changes the employees’ exempt status. In the worst possible scenario, employers have been required to pay the workers overtime for the past 3 years.
However, according to the SHRM, or Society for Human Resource Management, in some cases the courts have found that when a reduction in salary and hours for an entire class of exempt employees is part of a change in business tactics, the employees retain their exempt status.
Some states including California have different exempt employee laws.
Last 10 posts by Amelia
- Colorado Reduces Minimum Wage in 2010 - November 20th, 2009
- New Law Expands FMLA and NDAA for Military Families - October 30th, 2009
- California Approves Exempt Salary Reduction - October 16th, 2009
- 3 New Illinois Laws - October 9th, 2009
- New Definition of Disability - September 25th, 2009
- E-Verify Regulations - September 18th, 2009
- New USERRA Regulations - September 2nd, 2009
- E-Verify News - August 26th, 2009
- New Tennessee Workers’ Compensation Law - August 19th, 2009
- Louisiana Minimum Wage - August 3rd, 2009
Tags: California, employee, exempt, fair labor standards act, FLSA, hourly, lay off, Minimum Wage, non-exempt, recution, Salary, SHRM
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Posted by: John
Can an employee be held as a 36 hour (3X12hr shift per week) listed as exempt? Then be required to report for meetings during non scheduled times and not be paid anything for the meeting time?
Posted by: Amelia
Hi John! Yes. There is no requirement that exempt employees work 40 hours per week. The number of hours required per week is up to the employer, to establish for each exempt position. While most exempt employees work 40 or more hours per week, an employer can certainly hire an exempt employee to work 20, 30, or 36 hours per week — or any other number of hours. (Under federal law, the exempt employee must earn at least $455 per week.) And yes, an employer can require that an exempt employee attend meetings on his or her day off, without additional pay. (The exempt employee could even be required to work additional 12-hour days, with no additional pay.) If the employee does not attend the meetings, the employee can be disciplined or terminated. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Rob Whitters
If I was hired as both the site lead for my team in California and as the Modeling and Simulations lead. If my company decided to split these two positions can they subsequently reduce my salary or are they obligated to continue to pay what I was hired at? My company is based in Washington and I am working on a government contract.
Posted by: Amelia
Hi Rob! Because you have a contract with two states and the federal government involved, it may take an attorney to determine your rights in this situation. However, in general, an employer can reduce an employees salary when the job changes. (Actually, the employer can reduce the workers salary even if there is no change in job description, but that is another topic.) In many cases, when an employees salary is significantly reduced, and the employee quits rather than accepting the lower salary, the employee qualifies for unemployment benefits. However, if the employee continues to work at the new rate, he or she has accepted it and does not qualify for unemployment. HTH, and thanks for reading the blogs!~ Amelia
Posted by: steve
I am an exempt employee working 40 hrs a week-paid a salary based on per hour. No overtime pay is allowed since exempt. My hours were reduced to 32 hours a week which was to be considered permanent. My salary was reduced likewise based on the same amount per hour–still an exempt employee. I am still considered full time at 32 hours a week for benefit purposes. Thus no change in benefits.
Each office is independent but there are many offices. Other individuals with same responsibilites were not given reduced work ours and treated the same way. I accepted the change for reduced work and salary. According to federal law for salary employees-does it require the company to treat all employees in same classification and responsibilities the same?
Posted by: Amelia
Hi steve! Employers are permitted to treat workers in the same classification differently, if there is a valid business reason for doing so. For example, a retail operation might decide that a store with $100,000 in sales per month only requires the manager to work 32 hours per week, while a store with $200,000 in sales per month requires a manager who works 40 hours per week. This would be lawful.
However, if the employer decided to reduce your salary based on your race, color, religion, age (between 40 and 70), sex, pregnancy, or disability, that would be illegal discrimination. If you think that occurred, you should contact the EEOC to file a complaint at http://www.eeoc.gov. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Andrew
What is the maximun total hours that an employer can have a salaried manager work per day? per week??
Posted by: Amelia
Hi Andrew! We can guarantee you are not going to like this answer, but here goes…there is no maximum in most states. An employer can require an exempt employee to work 120 hours per week or more. In fact, theoretically, an employer could require an exempt employee to work 24 hours per day, 7 days per week. Obviously, that is physically impossible, but there is no law in most states to prevent it. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Eric
Sorry for digging up such an old post, great blog. My interest is in the legality of changing an employee’s status from exempt to non-exempt when the job responsibilities do not change.
In January we were told that starting Feb.1 that we would changing to a reduced work week of 4-day weeks, 32 hours. Consequently, my salary was reduced by 20%. After checking my pay-stub, I noticed that I was changed from an exempt employee to a non-exempt. This was never part of the communication from HR. We were told that in 6 months the situation would be re-evaluated. To me this means temporary.
Would you recommend that I seek the advice of a labor attorney? I had read somewhere that when you change from exempt to non-exempt, any overtime from some number of previous years (3?) could be retroactively requested as a grievence. In my case it would be hundreds of hours each year.
Thanks!
Posted by: Amelia
Hi Eric! This sounds legitimate to us. There is no law that any employee must be exempt. Any employer can make any employee, including the CEO, exempt at any time. The employee does not necessarily have to be told that the change is being made, although it would be a best practice.
Changing an exempt employee to non-exempt status does not entitle the employee to payment for overtime for the past 3 years in a situation like yours. The employer has changed the job, which is lawful, especially if it applies to a number of exempt employees.
When an “exempt” employee is suddenly treated as a non-exempt employee, with no change in working conditions or job, that can result in liability.If the employer kept switching the employee back and forth, from exempt one week to non-exempt the next week, the US Department of Labor would see that as an illegal attempt to avoid paying overtime. The DOL would probably sue the employer and determine that the employee wa never an exempt employee. The DOL would require that the employee be paid overtime for the past 3 years. However, that is not the case here. The employer made a formal announcement that they were changing the job — even though they failed to inform you that you were now non-exempt.
You may define a change that lasts 6 months as “temporary” but the US Department of Labor defines any salary change that lasts 3 months or more as permanent. So the employer handled this properly. In their defense, many, many employers are taking this step to avoid laying employees off.
You can certainly seek the advice of a labor law attorney, but frankly, you would just be throwing your money away if you filed a lawsuit. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Julie Wright
Who many days can a salary employee work before a day?
Posted by: Amelia
Hi Julie! Sorry, we’re a little unclear on what your question is. Could you repost it?Thanks~ Amelia
Posted by: Vaughn
Do the salary reduction restrictions apply to “draws” against commission? I have recently had my draw completely suspended until my business picks up. The company said they will re-evaluate in 3-4 months, though by that time I will be in the poor house. Also, the company has a zero tolerance policy (unofficial) to lay-offs due to (I’m sure) paying unemployment insurance premiums…do I have any legal recourse?
Posted by: Neal
I am an exempt employee (Chemical Engineer), with 29 yrs at my firm. This year, my employer gave us 2, 1 week furloughs (1 week in 2nd and 1 week in the 3rd quarter). Because this was a furlough, we were entitled to apply for unemployment pay.
However, in the 4th quarter, they are planning to reduce our pay 10% for 10 weeks, and reduce our hours by 10%. The effect is the same as a one week, 40 hr furlough, with the disadvantage of not being entitled to any unemployment pay.
Is this legal?
Thanks.
Posted by: Amelia
Hi Vaughn! No, commissions are not salary. Therefore, most regulations regarding salary do not apply to them.
Check with your state department of labor regarding the salary requirements for commissioned salespeople. Under federal law, generally they must be paid at least $455 per week. In many states, an employee who quits due to a significant reduction in salary or change in working conditions, qualifies for unemployment.
We are not clear what you mean when you say that the company has zero tolerance towards layoffs. That the company is not laying people off? Great!
Many companies have a policy of routinely denying every unemployment request. The employee can appeal the decision, and may win benefits upon appeal. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Amelia
Hi Neal! It is legal for the employer to unilaterally reduce a salaried employee’s wages permanently, as long as the employee is informed in advance. The employer can do this without any corresponding reduction in hours worked. (And most salaried employees across the country have had reductions of at least 15% over the past year.)
It is also lawful for the employer to reduce the hours worked at the same time, as long as the reduction is considered permanent. Legally, the federal regulations define “permanent” as “lasting every pay period for 3 months or longer.”
So it looks to us like the employer’s actions are lawful. The only problematic part is the fact that employees apparently are being encouraged to see this reduction as temporary.
An employee whose salary is reduced does not qualify for unemployment. When employees collect unemployment benefits, it increases the employer’s unemployment insurance premiums (sometimes for years.) So, the employer is trying to save on payroll without paying higher unemployment — which is a reasonable, prudent and responsible step for them to take.
When an employee’s salary is significantly reduced, and the employee quits rather than accept the reduction, in some cases the employee qualifies for unemployment benefits. However, it is not clear that a 10% reduction would qualify.
Posted by: Julie
I am a store manager ( exempt) we are not allowed to take vacation doing Nov - Dec I wants to go on vacation Dec 27 thru Jan3 can i get fired, I do not have a contract
Posted by: Amelia
Hi Julie! Yes, you can be fired for taking an unauthorized vacation. Suppose one of your employees did not show up for 10 days beginning the day after Thanksgiving. Would you fire him or her? Of course you would. It’s the same situation.
There is no law that an employer must offer paid vacations to workers. If the employer does offer a paid vacation, the employer can dictate when the employee takes it. Most employers require advance approval of vacation, and limit when the vacation can be used. Some employers even tell workers, “You will take vacation from July 15 to July 22″ or whatever. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Barbara
Can you please explain exempt salaried employees under this circumstance - Can you be an exempt salaried employee who was working 40 hour work weeks with X amount of pay and then ALL exempt salaried employees work a 32 hour work week and a 20% pay cut. All benefits will still be paid at 100%, although vacation and sick leave will be pro-rated based on a 32 hour work week and not a 40 hour work week.. What will the employer need to do to apply this and how much notice to the employees? Thank You.
Posted by: Amelia
Hi Barbara! Yes, this is a very common situation in the current economy. In fact, the majority of companies have had to reduce salaries for at least some employees.
The salary reduction is really not a problem as long as every exempt employee is still paid $455 per week or more. An employer can unilaterally reduce an exempt employee’s salary as long as employees are informed in advance. Different states require varying amounts of notice, but the best practice is to inform employees one full pay period in advance that their salary will be reduced. And this reduction can take place with no corresponding reduction in hours worked.
In fact, the reduction in hours worked is more of a problem than the salary reduction. Under federal law, an exempt employee’s salary cannot vary from week to week based upon the number of hours that he or she works. However, the federal courts have found that as long as the reduction in salary and hours lasts for at least 3 months, and is not presented to the employees as temporary, it is lawful.
Most companies already have a policy in place that vacation or sick pay will not be paid in excess of the employees scheduled hours — in this case, 32 per week.
The employer could still offer other benefits such as group health insurance at the same level as previously. If you have additional questions, feel free to post them. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Vicki Gorin
During my absence from the office due to FMLA one of our employees had their salary reducted by 10% for disciplinary purposes. This is a long-term employee with approximately three counseling forms on record. However, the employee received no advance notice of the salary reduction, no other employee has ever experienced a salary reduction due to disciplinary measures and there are employees on file with 8 to 10 counseling forms on record. What do you suggest?’
I am the VP of HR and the only person willing to follow the standard labor guidelines but am not sure how to proceed in this case.
Posted by: Amelia
Hi Vicki! There are 3 major concerns here. 1) Unless this individual’s transgression was especially egregious, singling him or her out for a salary reduction creates a situation where that employee could sue the company for illegal discrimination and win. The employee, of course, would claim that it was his or her race, color, religion, national ancestry, sex, etc. that resulted in this employee’s salary reduction when employees with 8 counseling forms did not experience the reduction.
2) It was unlawful to reduce the employees salary without notifying the employee in advance.
3) Under the new Ledbetter Act, any pay disparity between sexes can set the company up for a lawsuit, even 20 years later. So this decision could be a time bomb, if workers of a different sex in a similar position are making more money.
We suggest that you present these concerns to those who made the decision in your absence, and propose a compromise. The employee’s salary would be reinstated (perhaps retroactively.) This performance issue would be addressed on the employee’s next regularly scheduled evaluation, perhaps resulting in no salary increase and a lower rating. (If the employee’s conduct was especially egregious, we would have suggested an unpaid disciplinary suspension of 3 to 10 days at the time. However, imposing the suspension at this time is also problematic.) HTH, and thanks for reading the blogs!~ Amelia
Posted by: Harold H.
I realize employers are not required to give holidays.
I am an exempt employee. My company is requiring us to take Monday, Tuesday and Wednesday of the Thanksgiving week off without pay. They are paying us for Thursday and Friday as holidays. Can I get paid for a partial week?
Posted by: Amelia
Hi Harold! What the employer is doing is entirely lawful and even generous. Your are being paid for a partial week — you are being paid for Thursday and Friday as holidays. Assuming that you do no work at all during that payroll week, the employer could pay exempt employees nothing for the week.
There is no law that prohibits an employer from paying an exempt worker for a partial week. There is a law that prohibits an employer from paying an exempt employee from a partial week of WORK. (There are a few exceptions to that law, that don’t apply here.) Since you did not WORK at all that week, the employer’s actions are lawful.
If you worked one day that week, such as Monday, the employer would have to pay your usual salary for the entire payroll week. But paying an employee for a holiday is not the same as the employee working. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Paige
Amelia, just found this post.
Can an exempt employee who has already taken a 25% salary reduction be forced to take another 20% reduction–totalling 45%? And what is the maximum percentage of “pay cuts” allowed? (i.e. can a company force a salaried employee to take a 80% paycut?)
Posted by: Amelia
Hi Paige! Okay, first of all, an employer cannot “force” an employee to accept anything. The employer informs the worker of the pay cut, and the employee decides if he or she will work for the new wage. Usually an employee who quits rather than work for the new lower wage is entitled to unemployment benefits. However, if the employee works even one day at the new rate, the employee has accepted it.
There is no maximum percentage for the reduction. The employer can reduce an exempt employees salary to $455 per week. Employees who earn less than $455 per week are never exempt — they are always entitled to overtime. But outside of that restriction, there is no limit on the percentage or dollar amount of a pay cut. Suppose Jane earns $250,000 per year. The employer could reduce her salary by 90.536%, to $23,660 per year (or $455 per week) and Jane would still be an exempt employee. As long as the employer informed Jane of the change in advance, it is lawful.
However, if the employer reduced Jane’s salary to $454 per week, then Jane would be entitled to overtime when she works more than 40 hours per week.
Nationwide, most salaried exempt employees have taken a pay cut of about 22% since July 2007, but the amount is greater in some industries. HTH, and thans for reading the blogs!~ Amelia
Posted by: Bo
The company I work for changed our pay period from twice a month to every two weeks. With that change came a reduction in my salary. I was recieving 24 checks per year and now I will be receiving 26 checks a year. The company reduced my salary so that the 26 pay checks equal the 24 pay checks. They notify us about the change bimontly to biweekly. The managers never notified us about the change in salary.
Posted by: Amelia
Hi Bo! This is not a reduction in salary. Your paycheck is for less each payday. But since you are paid 26 times in the year instead of 24, you will earn the same amount each year. It is lawful for the employer to do this, and they even followed the best practices in HR.
When the company informed you that from now on you would be paid every 2 weeks instead of twice per month, a reasonable person would have assumed that each paycheck would be slightly less. If your paychecks were the same, the company would actually be giving you a substantial raise. HTH, and thanks for reading the blogs!~ Amelia
Posted by: len
amelia,
I want to ask about the company where my husband works.. He is a 5 years working in the company. And now, the problem is last month his salary was reduced to 43% without any reason. His co-employees are receiving the same salary except him. He tried to talk the management regarding his problem but until now there is no answer to his complaint..
Is this legal for a company to reduced the salary in one of his employee without any reason? I need some advice from you…
thanks a lot,
len
Posted by: Amelia
Hi len! Unfortunately, if your husband knew about this reduction in salary in advance, it is legal.
An employer can reduce any employee’s salary at any time, as long as the employee is informed in advance of the new rate. Some states require that employees be notified several weeks in advance, but in other states even a one-day notice is enough.
Many companies are reducing all employee’s salaries in these tough economic times, because the alternative is to lay off employees. However, usually this type of salary reduction affects everyone — not just one person.
It is possible that your husband has been demoted. In that case, the employer found your husband’s performance was lacking, and changed him to a lower-paying job. If that is the case, there is little that you can do about it at this point. (Is it possible that your husband knows this, and just doesn’t want to tell you?)
However, if your husband’s performance is good and he has been unfairly targeted for this rather large reduction in salary, that may be illegal discrimination. For example, if your husband were the only Hispanic employee (or the only Hispanic manager), and the only one to receive a salary decrease, that would be illegal discrimination. If that is the case, he should file a complaint with the EEOC at http://www.eeoc.gov. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Kathy
Amelia, I work at a furniture manufacturing company in Kentucky. Summer is our slow season. In order to prevent a huge layoff this past summer, we imposed a pay cut for all salaried employees and reduced work hours for all production & non-salaried office employees in July 09, which everyone was fine with. We are waiting for orders to increase so that we may return all employee’s pay / hours to what they were before the pay cut. My question is, if we were to face this problem again next summer, would this be unlawful to do again? And is there a problem with how we handled this issue?
Posted by: Amelia
Hi Kathy! Your actions sound completely lawful to us — and we think you handled the situation well.
It is always lawful for an employer to reduce hourly employees’ hours, therefore reducing payroll. This is a very prudent way to control costs and avoid layoffs.
It is lawful for an employer to reduce exempt employees’ salary, as long as the employees are still earning at least $455 per week, before taxes. The salary reduction is absolutely not an issue, as long as the exempt employees know about it in advance, and it lasts for at least 3 months. Ironically, it is when you reduce the exempt employees’ hours, as well as their salary, that a problem can arise. However, as explained in the article above, as long as the reduction lasts for 3 months, and affects an entire class of employees, it is lawful.
You could do the same thing next summer and it would still be lawful. However, you might want to consider another option. There is no law that you must return employee’s wages to their previous level. Many hourly and salaried employees have had permanent reductions in wages due to economic conditions. So you could certainly give employees a slight increase, perhaps 50% of the wage reduction. This measure should mean that you won’t have to reduce salaries and wages again next summer. (Just to be safe, though, don’t make any promises. We never know what the economy will do.) HTH, and feel free to post any additional questions you might have!~ Amelia
Posted by: Sean
Hi,
I am an exempt employee. I recieve a set salary, paid twice monthly.
I was informed last week that I need to take 1 day off a week temporarily, resulting in my salary being reduced by 1 day.
is this legal? an exempt employee being laid off 1 day a week essentially is what is happening. I always thought exempt was paid to do a job not hours worked.
Posted by: Amelia
Hi Sean! This may not be lawful.
You are a salaried employee — but not all salaried employees are exempt. It is lawful for an employer to pay any employee on a salary basis, to make processing payroll easier. However, a salaried employee can be either exempt or non-exempt. A non-exempt salaried employee is still entitled to overtime when working more than 40 hours in the payroll week. In addition, the non-exempt salaried employee’s salary can be docked, when the employee works fewer than normal hours in the payroll week.
Exempt employee, on the other hand, must be paid their full weekly salary if they do any work whatsoever in the payroll week, and are ready, willing and able to work the entire week.
If you are genuinely an exempt employee, then the employer can put you on furlough one day per week, or can give you an extra day off. However, as the article above explains, you must be paid your usual weekly salary.
The employer can permanently reduce your salary to 4/5 of the former rate. It is completely lawful to permanently reduce an exempt employee’s salary. In many cases, it is also lawful (but not necessary) to permanently reduce the exempt employee’s work week, at the same time. However, it sounds as if this change is temporary.
The employer may be treating you as a salaried non-exempt employee (which means you would be entitled to overtime.) Or, if you are genuinely exempt, the employer is taking an unlawful action when they reduce your salary for a one-day furlough. Refer to the article above for more details. You can file a wage complaint with the US Department of Labor at http://www.dol.gov. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Kristi
I am an exempt salaried employee. We had been receiving Holiday Pay for the majority of the yearly Holidays. We were just told that we would not be receiving holiday pay for Veteran’s Day. or the Day after Thanksgiving. I inquired if I could use my accrued vacation days/or personal days in lieu of the Holiday Pay. I was told I could not since it would defeat the purpose of not paying any of us Holiday Pay. Our company is closed on Veteran’s Day and the Day after Thanksgiving. My salary will be reduced from 40 hours of pay to 32 hours of pay. Is this legal?
Posted by: Amelia
Hi Kristi! No, this is not legal. First of all, there is no federal or state law that any US employer must observe holidays, or pay employees for holidays if the business is closed on that day. So the employer can legitimately eliminate all holidays.
Even if the employer has an established practice or a written policy of observing certain holidays, and offering paid holidays to employees, the employer can change that policy at any time. In the case of paid holidays, the employer gives and the employer can take away. And, the employer is giving employees plenty of notice that they will not be paid for Veterans Day and the day after Thanksgiving. (Very few employers observe those days as holidays anyway.)
However, under the federal FLSA or Fair Labor Standards Act, a salaried exempt employee who is ready, willing and able to work the entire week, and works any part of the payroll week, must be paid his or her usual salary for the week. So if you are genuinely an exempt salaried employee, and you work a portion of the payroll week, you must be paid your full salary even though the employer is closed on the holiday. Example: Suppose you work Monday, Tuesday and Wednesday of Thanksgiving week. The business is closed Thursday through Sunday. An exempt employee must be paid her full salary for the week, as long as she was ready, willing and able to work the entire week. If the employer pays you for only 32 hours, they are treating you as a non-exempt salaried employee. That would mean that among other things, you are entitled to overtime when you work more than 40 hours in the payroll week. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Kathy
Amelia,
Thank you so much for your response to my previous question. Hoping you can help me with another question. I work in the HR dept for a privately owned furniture manufacturing company in the state of Kentucky. I was wondering, are we required to allow employees to view their files, if requested? If so are they entitled to more than 1 viewing of their files? And are the files of HR employees suppose to be kept separated from other employee files?
Thanks!
Posted by: Amelia
Hi Kathy! You are very welcome! We have a special website set up just for questions from HR pros like you. It’s at http://www.humanresourceblog.com. I also answer the questions on that site, so feel free to post as many questions as you like.
But to address this question –
A few states have laws that permit an employee to view his or her personnel file, or even have a copy of the file. Kentucky does not. These are private business records, and you are under no legal or moral obligation to share them with any employee. The best practice in HR is to give employees a copy of any written evaluation or written warning at the time. However, it is up to the employee to keep up with these documents. You are under no obligation to offer additional copies — and frankly, we suggest that you do not. (It goes without saying that you would never give an employee access to another employee’s file, or leave the employee unsupervised in a room with all the personnel files.)
Unless the employee has a subpoena, you are not obligated to allow them access to personnel files.
The best practice in HR is to keep personnel files in a locked drawer or file cabinet separate from other business records, but there is no law that this must be so. However, ADA and other laws require that confidential medical information be kept separate from the employee’s personnel file, in a different location where it cannot be viewed by the employee’s supervisor. In addition, the law permits you to keep copies of supporting documents for the I-9 form, but they should be in a separate file as well. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Kathy
Hi Amelia, I had a couple of questions I was hoping you could help me with. We have an employee who has been on worker’s comp. leave since April 2009. He has now been released to work but with permanent restrictions that we cannot accommodate. We are a furniture manufacturing company in Kentucky and there really isn’t any way for us to keep him as an employee with his restrictions. Also he has obtained an attorney, so my question is what is the best way to handle this situation?
Also, job descriptions area and responsibilities, are these two different things? Or can we combine them should we be audited?
Thanks so much for your help.
Posted by: Kathy
Ameila,
When it comes to slander, slamming or defaming the company to customers, other employees, relaying confidential information or misinformation especially to customers. What does that fall under and what does the company need to have or do in order to prove this?
Also, misconduct: what are examples of this and what needs to be specifically done by employee and what proof do we need to have for proper termination and not eligible for unemployment if an employees is let go for this. Does slander falls under conduct?
Thank you in advance!
Posted by: Amelia
Hi Kathy! First of all, you need to contact your workers’ comp insurance company about this topic. They are your first advocate in this situation.
But here is what the insurance carrier won’t tell you: We understand that you cannot accommodate this employee’s restrictions. But if he cannot return to work for you, he has a permanent disability. And having a workplace accident resulting in permanent disability will increase your workers’ comp premium, for every employee, for many years to come. So it might actually be less expensive in the long run for you to create a job suitable for this employee, rather than have him unable to return to work. For example, you might create a position as a file clerk, earning minimum wage, for this employee. Legally, you don’t have to do this — but again, it could actually save you money. (In a year or two, you could eliminate the position of file clerk without any impact on your workers’ comp insurance premium.)
If at any time you feel that the insurance carrier is not representing the company well, then you will need to consult an attorney specializing in workers’ comp. Generally when an employee “lawyers up,” the employer needs to, also.
As far as job description and responsibilites — we are not sure in what context this is being used. On an application? Job posting? For workers’ comp? But we will say that generally, responsibilities are more specific than a job description. The job description might be to answer client questions as a customer service rep. The responsibilities might be to answer 36 calls per hour, and provide courteous service to all callers. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Amelia
Hi Kathy! We would qualify slander or defaming the company or other employees as willful misconduct. That is also how we would describe relaying confidential company information or misinformation to customers. (Be aware of one limit on slander or defaming the company. In situations where employees are discussing forming a union, or organizing the labor force, much of that communication is permitted by federal law, even when it involves people outside the company.)
If we were filling out a termination form, under reason we would put: Willful misconduct — defaming the company or Willful misconduct — relaying confidential business information to persons outside the company.
Most employee handbooks have a “code of conduct” that specifically prohibits this type of action by employees. In many cases, under company policy, any of these actions are gross misconduct punishable by immediate termination — and justifably so. Make the language on the termination form as close as possible to the language in the employee handbook. This makes it very clear to the unemployment agency that the employee was aware that this conduct was prohibited. (If these types of actions are not covered under the employee handbook, it might be time for a new one.)
In terms of proof, the standard for termination is much less strict than for criminal prosecution. Simply have any employee, supervisor or customer who observed this behavior write a note stating what he or she observed the employee doing, sign and date it. If the termination is based on a customer complaint, you can simply have the supervisor or coworker write a note stating, ” On November 1, 2009 customer Joe Blow complained that…”
Kentucky is an employment-at-will state, meaning that you can terminate any employee at any time for any reason or without any reason. So you really do not need any proof to terminate the employee. However, in some cases the employee may be entitled to unemployment benefits. Generally an employee does not qualify for unemployment when the misconduct is willful — meaning a) the employee was fully aware that this was against company policy and b) the employee had control over the behavior. If the employee has signed the employee handbook, that should satisfy requirement a). All of the situations you mentioned are conduct that the employee has control over. (Will we say that state unemployment agencies are not 100% predictable, and sometimes act in illogical ways. But you are much, much better off without this employee.)
In the future, if you fire an employee for matters of company policy that are not covered in the employee handbook, you may want to have 3 written warnings before you terminate the employee. This demonstrates that the employee was fully aware of the company policy (for example, about tardiness or meal breaks) and that you gave the employee every chance to comply. But frankly, in the case of disclosing confidential information or passing misinformation to customers, we would not wait that long to terminate the employee.
Posted by: karen
My company just laid off around 15 people last week & we have around 30 employees left. The president of the company told my supervisor couple days ago that me & my supervisor will both get a 20% pay cut but everyone else in the company still make the same money. I am the only Asian in the company, I am 4 mths pregnant, I feel totally discriminated because of my sex & being pregnant. What should I do? I live in Missouri, if I quit, can I get unemployment? Also am I eligible for COBRA/ARRA the 35% subsidy for my health insurance (since health insurance is very important to me because I am pregnant)? Please help, thank you!!!!
Posted by: Amelia
Hi karen! If the employer is reducing your salary because you are Asian or pregnant or both, that would be illegal discrimination. However, if there is a valid business reason for the two of you to be selected, that is not illegal discrimination. For example, if the two of you were the only ones in your department or are the highest-paid employees, those would be valid business reasons.
In many cases, an employee who quits rather than accept a 20% pay cut is eligible for unemployment. However, if you work under the new salary for even one day, you have accepted it. You will be eligible for COBRA if you quit. However, you will not be eligible for the COBRA/ARRA subsidy, so you will have to pay 100% of the premium, rather than 35%.
One possible solution: let the president of the company know that you think this is discrimination, but if he decided to lay you off, you would not file a complaint. If you are laid off, you will qualify for unemployment and the COBRA subsidy.
Another option would be to remain with the company, but file a discrimination complaint with the EEOC at http://www.eeoc.gov. HTH, and thanks for reading the blogs!~ Amelia
Posted by: holly
Hi there,
I am a salaried exempt employee (actually the only one at my job, everyone else is hourly). We do not receive benefits, no vacation, no sick time, no paid holidays. Last week I was sick with the flu. Prior to finding out my condition I worked 1 full day and 2 partial days, then was told by my owner to stay home and rest and come back on Monday. I did so not thinking any different, then when pay checks came in mine was short. He docked me 24 hrs without notice! Am I entitled to pay for the week or is he in the right?
Thanks in advance,
Posted by: Amelia
Hi holly! A salaried employee can be either exempt or non-exempt. It appears that the employer is treating you as a non-exempt employee, which would make you eligible for overtime if you work more than 40 hours in the work week. A non-exempt employee’s salary can be prorated when the employee works fewer than 40 hours in the payroll week.
Assuming that you were genuinely an exempt employee, you would be entitled to the full week’s salary when you were sick, under federal law. An exempt employee who works any part of the day is entitled to the full day’s salary. When an employer offers no paid sick leave, the exempt employee must be paid his or her usual salary for the payroll week, during any week in which the employee misses one or more days due to illness. (The rules would be different if your employer offered paid sick leave under some circumstances. Ironically, when the employer offers a bona fide paid sick leave plan or policy, and an exempt employee exceeds it, the employee need not be paid if they are absent from work the entire day. Different rules would also apply if you were absent for a reason other than illness.)
Since you are being treated as a non-exempt employee, you could file a wage claim with the US Department of Labor at http://www.dol.gov for any overtime worked in the past 2-3 years. Or, you could file a wage claim for your full week’s salary, as an exempt employee. HTH, and thanks for reading the blogs!~ Amelia
Read more about this at: http://www.dol.gov/whd/regs/compliance/fairpay/fs17g_salary.htm