Exempt Employee Furlough and FairPay Regulations
February 11th, 2009 Posted by MadisonIn an effort to reduce costs, many employers are considering furloughs – unpaid leave – for exempt employees. However, furloughs can be a legal minefield, if not handled properly, according to the SHRM, the Society of Human Resource Management.
According to the U.S. Department of Labor regulations issued in 2007, an exempt salaried employee is entitled to his or her full salary in any week in which the employee does any work at all – regardless of the number of hours that the employee works.
Under the federal FairPay regulations , an exempt employee who works for 10 minutes during the week is entitled to the same salary as if he or she worked 100 hours during the week.
Also under the FairPay regulations, if an exempt employee is ready, willing and able to work on a particular day, but no work is available, the employer must pay the worker for that day. For example, if the business in Kentucky is closed by a massive power outage, exempt employees must still be paid for that day. Hourly or non-exempt salaried employees need not be paid, under the FLSA or Fair Labor Standards Act.
This means that an employer cannot furlough an exempt employee for one or two days. Even if there is no work, or the employer asks the employee to remain at home and take the time off, the employee must be paid his or her entire salary for any payroll week in which the employee performs any work at all.
However, there is a way for employers to save money by furloughing exempt employees – as long as the furlough is for the entire payroll week. As long as the furloughed employee does no work whatsoever during the payroll week – including working from home – the employee need not be paid that week.
The complexity of these regulations is illustrated by the fact that even experts do not always agree on the interpretation of the law. One source at SHRM, who asked to remain anonymous, suggested that furloughing the employee for an entire payroll week would not be legal, if the company was shuttered. But, if the company continues to operate as usual, the unpaid furlough would be legal.
Despite dissenting opinions, most experts agree that as long as the exempt employee does no work whatsoever during the payroll week, the employee need not be paid.
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Posted by: Judi
It seems that your statement about “shuttering” — is wrong. Can you confirm this is correct. Many HR folks are questioning this.
Posted by: Madison
Hi Judi!
Presumably, the statement you are referring to is:
“The complexity of these regulations is illustrated by the fact that even experts do not always agree on the interpretation of the law. One source at SHRM, who asked to remain anonymous, suggested that furloughing the employee for an entire payroll week would not be legal, if the company was shuttered. But, if the company continues to operate as usual, the unpaid furlough would be legal.”
This statement is 100% factual. In researching this article, I emailed an HR Knowledge Advisor at SHRM named John S.[last name redacted] who emailed me that in his opinion, if the business is shuttered for an entire payroll week, the exempt employee must be paid. If the business is open, and the exempt employee does no work at all during the payroll week, even at the employers request, the employee can be unpaid.
The SHRM Knowledge Advisor actually said, “”If the operations (sic) is closed for the week, the exempt staff would have to be paid for the week regardless of whether they performed any work.”
That is not how we read the law. We read the FLSA to indicate that if the employee does no work at all during the payroll week, he or she need not be paid. But when a source as respected as the SHRM sends us a dissenting opinion, we feel duty bound to present both sides to our readers.
When we asked John for clarification on this, he rather rudely referred us to one of their published articles that seemed to refute his opinion. His exact words are, and we quote: “Please refer to the article I sent you (reinserting link below), if the employer closes the facility and exempt employees are ready, willing and able to work, the exempt employees must be paid. If the facility remains open, then no pay is due exempt employees if they perform no work for the week.”
On the other hand, the article John S. referred us to (which is only available to SHRM members) repeatedly states that an exempt employee who performs no work during the week need not be paid. It makes no mention of a different rule if the facility is closed.
**Update on 2/15/09: During a follow-up question, the SHRM Knowledge Advisor agreed that our interpretation of the FLSA was probably more correct. If the exempt employee does no work for the entire week, even if the facility is closed, the employee need not be paid.**
If you are an HR pro, we would love to hear your opinion on this issue. Please post your comments. Thanks for reading!~ Madison
Posted by: linda
My husband recently got furloughed from his job in Ohio by a privately owned co. They told him they hope to call him back within 90 days, during this time he is alowed to collect unemployement. The problem here is that they keep calling him back in to the office for a day here and a day there. (paying him on a “sub contractor” basis of x $ per hr, he is responsible for the 1099 at the EOY). This in turn fowls up his unemployment status and he is constantly closing claims just to re-open them the following week. This can be a total nightmare, not sure if you’ve ever tried getting though to a unemployment office but it is nearly impossible. They are holding a severance pay package over his head telling him he will not get this if he refuses to work when asked to. IS THIS LEGAL???
Posted by: Amelia
HI Linda! In most states, a worker does not have to close thier unemployment claim if they are working a day here and there as an independent contractor. The worker DOES have to report any income earned to the unemployment office. Usually, if the worker reports that he or she earned $100 in the week, their weekly benefit is reduced by about $100. But they do not constantly have to close and reopen claims, because they are not working regularly.
Usually the monies earned have no impact on the total amount that the employee can collect from unemployment before it “runs out.” Example: John is eligible to collect $8,000 in unemployment. Even if John works as an independent contractor occasionally, he is still eligible to collect the entire $8,000 in benefits during his unemployment. It may be spread over more weeks, but he is still eligible to collect that amount.
Not reporting the income at all would be fraud, so we don’t recommend that.
There is no guarantee that the employer will offer a severance package, even if your husband continues to fill in on a 1099 basis. But, there is probably no harm in doing so. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Elphonso
Are thier different rules for State employees?
Posted by: Amelia
HI Elphonso! Yes, thanks for bringing that up! The federal FLSA and Fairpay regulations apply to private businesses in the U.S. with revenue over $500,000 per year, or that do business in more than one state.
The federal regulations do not apply to employees of the state or local governments, in most cases. In most states, those individuals must follow state law, which does permit unpaid furloughs shorter than a week. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Suz
My boyfriend is a salaried manager at his company located in KY (they also operate in CA, where he moved from.) During certain times at work, they have closed the office due to no work or bad weather. Even though he is a salaried employee, he is told that he must use his PTO in order to be paid for those days the office is closed. He knows this is not right, but is not sure how to go about approaching it with the employer.
Posted by: Amelia
Hi Suz! Actually, this is entirely lawful, in both Kentucky and California. Employers have the right to dictate when an employee uses his or her PTO or vacation time. In some cases, an employer will shut down a factory for one week and require every worker to go on vacation on that same day.
In other cases, exempt (or non-exempt) employees will be required to use their vacation time or PTO on days when the business is forced to close.
The federal FLSA says that exempt employees must be paid their full salary for the payroll week, if they work at all, even if the business is shuttered for one or more days during the week. However, that law does not address the use of PTO at all.
If your boyfriend had no PTO left, the company would still be required to pay him for the shut-down, unless he was off the entire payroll week. However, as long as he has PTO, he can be foreced to use it. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Alicia
This is very confusing. My brother’s company in CT just announced 7 separate furlough days for all employees. He is exempt and he is required to take these days as specified by the company (not together). Even worse, he is required to be on-call for some of those furlough days. They say that if he actually has to come on site (vs. not being called or handling things off site), his furlough date will be changed. But he can not travel in case he is called in. Is that really legal?
Thanks!
Posted by: Amelia
Hi Alicia! If your brother is an hourly employee or a non-exempt salaried employee, yes, this is legal. If your brother is a salaried exempt employee, he must be paid for any week in which he does any work at all, as long as he is ready, willing and able to work the entire week. However, the employer can require that your brother use vacation days or PTO to cover the furlough days. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Kevin
I was wondering how this would apply to a foreign national working under a visa (H-1B or TN for example). Since they wouldn’t qualify for unemployment benefits and since the visa is only valid as long as they’re employed/working, would they lose the visa status?
Posted by: Amelia
Hi Kevin! Yes, in most cases the foreign national would lose his or her H1-B visa as soon as they cease to be employed. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Joyce McMichael
Are the exempt employee furlough regulations (exempt can furlough for a week if NO work done and not be paid) the same in all states? We are looking into this for some people in the state of New York, Missouri, Arkansas, Pennsylvania, and Minnesota. Do specific states have laws prohibiting this?
Posted by: Amelia
Hi Joyce! Yes, these regulations are the same in all states because they are federal regulations under the FLSA, the Fair Labor Standards Act. All of the states that you mention either a) have no regulations at the state level regarding exempt employees or b) have state regulations that are the virtually the same as the federal regulations. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Danielle
We are thinking of requiring furloughs for our employees to save money during our slow season this summer. We would not close during any of this time and remain in operations. These employees are exempt status, but our payroll period is the 1st - 15th or 16th- end of month. Do we need to apply a furlough to the entire pay period, or can do this a week at a time?
Posted by: Amelia
Hi Danielle! You could apply the furlough one payroll week at a time, under the federal FLSA. This is true, regardless of how long the pay period is. As long as the exempt employee does no work at all for the entire payroll week, he or she need not be paid for that week. HTH, and thanks for reading the blogs!~ Amelia
Posted by: JoLeen
Message: How does a paid Holiday during the furlough week impact exempt employees ability to collect unemployment bennefits?
Posted by: Amelia
Hi JoLeen! Employees often qualify for unemployment when their hours are severely reduced — as well as when they are entirely out of work. In this case, the employee must report any income to the unemployment agency. (Not doing so could result in the employee being charged with fraud.) However, this income would not result in an employee who otherwise qualifies for unemployment being denied benefits. It may reduce the benefits.
We will add that it is unusual in many states for an employee who is furloughed for only one week to qualify for unemployment. HTH, and thanks for reading the blog! ~ Amelia
Posted by: Missy
Our company is considering a week furlough. As an exempt salaried employee I would rather take five fridays off instead of one whole week. This way I still get partial pay instead of no pay. If I agree to work 4 days with pay and no work 1 day without pay (furlough), would this be legal, since I agree to it?
Posted by: Amelia
Hi Missy! Unfortunately, no, this would not be legal. Employment laws are not matters of personal choice. Even if an employee agreed to work for less than the minimum wage, it would not be lawful. Even if an hourly employee agreed to work more than 40 hours per week with no overtime, it would not be lawful.
By the same token, exempt employees are entitled to their full weekly salary when they work any time at all during the payroll week — even a few hours.
If you took off 5 Fridays in a row, the employer would still have to pay your entire salary each of those 5 weeks, by law. For exempt employees, salary is all or nothing — it cannot be prorated. Either the employee is entitled to his or her full weekly salary, or they are not. If the employee does no work at all during a payroll week, then he or she need not be paid for that week. (There is an exception for employees on FMLA leave, or those with disabilities under ADA, but neither is the case here.) HTH, and thanks for reading the blogs!~Amelia
Posted by: Annie
I am an exempt employee with 5 weeks of vacation. I have just been told that one of my scheduled vacation weeks will become a furlough week - no pay, no choice in what week. I was also told that I could not reschedule this vacation week and that I will not be able to take it in 2009. The company also has a no carry over policy of vacation and I will not be able to carry this week into 2010 nor will they pay me out for the week. I thought vacation time was earned time and an employment benefit. Can they do this?
Posted by: Amelia
Hi Annie! This will depend partly upon which state you are in. If you were in California, for example, the employer would have to pay you for the week of unused vacation at the end of the year. In most other states, if you did not use all your vacation, you could lose it.
However, the employer is essentially reducing your total vacation time by one week. If you are the only employee who is being treated like this, it may be illegal discrimination based on sex, race, color, religion, etc. If the employer was reducing every employee’s vacation balance by one week, or reducing the balance for every employee with 5 weeks of vacation by one week, and giving employees at least a week’s notice, that would most likely be legal. Vacation is a benefit but in most states it is not earned time — and even in most states where it is, the use-it-or-lose-it policy is legal. HTH, and thanks for reading the blogs!~ Amelia
Posted by: amy
Hi, my business has informed all US Salaried Employees that we will be furloughed for 2 weeks in the next 2 quarters. We have been given 4 weeks to choose from (1 week in either July, August, October and November). I’ve choosen to take July and November. I live in Massaschusetts. I’ve learned that they obviously did their homework as they have been very clear that “no work is to be performed by furloughed employees”. Also, from what I understand the splittling up of these weeks will make it impossible for us to apply for Unemployment Benefits. Is this true? Will I be able to receive benefits at all. I was told it might be a good idea to go ahead and open a claim the 1st week just because it takes so much time and then when I take my November furlough I might be able to get benefits for the 2nd week? Also, is there a waiting period in Massachusetts. I just can’t seem to find the answers.
Posted by: Amelia
Hi amy! You are right — this Massachusetts employer knows what she is doing. Like many states, Massachusetts has a one-week waiting period for unemployment during which the employee must be unemployed and looking for work, but collects no benefits. The second consecutive week, the employee qualifies for benefits. Because it is structured this way, you probably won’t be able to collect benefits for either week of furlough.
The employer is structuring it this way, because if employees were eligible for unemployment benefits, the company’s unemployment insurance premiums would go up significantly. As tough as this is for employees, the alternative is probably laying people off permanently. HTH, and thanks for reading the blog!~Amelia
Posted by: Melissa
Pertaining to government employee’s (specific-city municipality)
Please clarify that exempt salaried are or are not permitted to take a day here and there to make up the furlough as it is implemented from the city? Or, for it to be legal, do we have to take a full week?
Also, is there any legal restrictions to the extent that non-union individuals are being forced to take the furlough, but the union employees are not (according to their contracts).
Posted by: Don
Regarding exempt employees furloughed for a week, does this mean absolutely no work at all? As in no phone calls or contact to anyone in the office regarding status of projects? ie.. shut my pc down, close up my blackberry, etc… I would appreciate an answer so I don’t get the company in trouble if I step over the line.
Posted by: Amelia
Hi Melissa! Generally the federal FLSA does not apply to state or local government employees. You will have to consult the law in your state, city and county to determine if it is legal in your area. However, it is legal in most areas for city or state employees to be furloughed for a day or two. Many municipalities are going through this right now, due to budget crunches caused by the economy.
Yes, it is legal to treat union and non-union employees differently. Many would say that is the purpose of joining a union. HTH, and thanks for reading the blogs!~Amelia
Posted by: Amelia
Hi Dan! Yes, that means no work at all — even from home, even phone calls and checking the email on a blackberry. If the employee on furlough does even one minute of work during the week, he or she is entitled to their entire salary fo the week. HTH,and thanks for reading the blogs!~Amelia
Posted by: Daniel
I am a salaried exempt employee in Connecticut. My employer is requiring that we take 10 days as furlough but the days are spread throughout the rest of the year with no two in the same week. I thought reading your responses above that exempt employees like me would lose our exempt status if our company did this. Do they get around this because they have lowered our salaries for the rest of the year instead of just not paying us for the exact days?
Also they are requiring that for some of the days that we are on furlough, we also be on call. This will mean that we can not travel, must carry a cell phone and answer calls. Reading your responses I am confused since I thought that I could not do any work yet my company is asking me to do this. I appreciate your input!
Posted by: Amelia
Hi Daniel! We can understand your confusion. Although your employer is calling this a furlough, it’s not — it’s a reduction in salary. An employer has the right to reduce any employee’s salary, including an exempt employee. The reduction need not be accompanied by a reduction in hours worked. As long as the reduction lasts for 3 months or more, it is considered “permanent” under federal regulations, and is legal.
In addition to this reduction in salary, your company is giving you 10 additional days off at some point spread through the rest of the year. That is legal, because you will be paid your (new, reduced) weekly salary every week. Because you are still being paid your salary for the week, even if you work on some of those furlough days, that is entirely legal. I have posted several articles in the past few months on exempt employee salary reduction — you can read them in the archives. This is a confusing issue, so feel free to post any additional questions that you may have. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Jacob M.
Okay here’s my situation:
I’m located in Utah and my company has a two week payroll period. The company is NOT privately held, but is a company traded on the PENNY STOCK MARKET. We do business across the US and internationally. We have a salaried employee in New York City and one in Washington, with the bulk of us in Salt Lake City, Utah.
During the last few months I have been working maybe a day or two each pay period. I am a Salaried Employee. My company has been treating me and the other salaried employees like hourly employees and having us fill in time sheets showing the amount of hours we have been working. So for example in a payroll period of 2 weeks I work maybe 20 hours. The company would pay me 20 hours times an hourly rate.
Is this legal? Do I have grounds to demand they start paying me a full pay periods worth of salary if I even do an hour of work during the pay period? Please help me out here!
Posted by: Amelia
Hi Jacob! This may be legal…we don’t have enough information in your post to make that determination. It sounds like you and your coworkers may have been non-exempt salaried employees who assumed you were exempt employees.
Because your company does interstate commerce, it is covered by the FLSA or Fair Labor Standards Act. Under the FLSA, any employee can be paid on salary, simply to make processing payroll easier. Salaried employees can be exempt or non-exempt. A non-exempt salaried employee is entitled to overtime when he or she works more than 40 hours in the payroll week, and can be paid less when he or she works fewer than 40 hours in the payroll week.
Exempt employees are never entitled to overtime, regardless of how many hours they work in the payroll week. Under FLSA, exempt employees must fall into one of 5 categories based on their primary duties: Executive, Administrative, Outside Sales, Professional, or Computer Professionals. More details are on the fact sheet below.
It appears that the employer is treating you and your coworkers as non-exempt salaried employees. You may have always been non-exempt, or the employer may have recently changed your status from exempt to non-exempt. Such a change is lawful, as long as it is permanent. The FLSA regulations define “permanent” as lasting for 3 consecutive months or more.
It is always lawful and prudent for the company to track the number of hours that employees work, regardless of the employees’ exempt or non-exempt status.
There is no law that requires the employer to ever treat any employee as exempt. Even the CEO can be hourly or salaried non-exempt, if the company chooses. But the employer cannot treat an employee as non-exempt one week and exempt the next. If there are weeks when you work more than 40 hours without being paid overtime, then you are exempt. In that case, if you work any portion of the payroll week, you are entitled to your entire weekly salary. HTH, and thanks for reading the blogs!~ Amelia
Read more about this at: http://www.dol.gov/esa/whd/regs/compliance/fairpay/fs17a_overview.pdf
Posted by: Jacob M.
Hi Amelia,
I have a copy of my contract right here dated January 28,2009. It says that I am an ” Exempt Full time Employee”.
Now my company does payroll on a TWO week basis. Do I have grounds to demand payment for that entire TWO week period if I do even an hour of work during that time period? Or do I only have grounds to demand a weekly salary as broken down on a weekly basis for each week that I do SOME work?
Now Amelia, you say that “You may have always been non-exempt, or the employer may have recently changed your status from exempt to non-exempt. Such a change is lawful, as long as it is permanent. The FLSA regulations define “permanent” as lasting for 3 consecutive months or more.”
I have several questions on this:
Questions: Can my employer during any time this pay period change my status from EXEMPT to NON EXEMPT without informing me? Is that legal? Also if I confront them about this, and they decide to change me from EXEMPT to NON Exempt in the middle of the pay period does my new status of non exempt immediately take effect or is there a delay until next pay period? If it is immediate they could effectively deny me my entire salary for that pay period week and only pay me for the hours that I actually did.
Essentially I am wondering can they do this at any whim? I understand it has to be permanent ( for at least 3 months) before they can change.
I appreciate your assistance and look forward to your reply. =D
While I wait I’ll read that link you gave me. Thanks
Posted by: Amelia
Hi Jacob! Anytime there is an employment contract or written agreement in place, we suggest that the employee consult an attorney. We don’t give legal advice, and it is impossible for anyone to do so without reading the entire contract.
The unit of measure for the salary and overtime law is the payroll week, not the pay period. The pay period can be a week, two weeks or (in some states) one month long — but the federal laws apply to the payroll week. If you genuinely are an exempt employee (and there is still doubt in our minds) then the employer would be required to pay your entire WEEKLY salary for any PAYROLL WEEK in which you performed any work at all. But not for the entire two-week payroll period.
The best practice in HR would be to inform employees that their status has been changed from exempt to non-exempt. There is no law that payroll changes have to coincide with the beginning or end of a payroll period, or a payroll week. They could switch you from exempt to non-exempt in the middle of the payroll period. However, in many states payroll changes cannot be retroactive. But again, it appears that the employer may have changed your status from exempt to non-exempt already.
Yes, any employer can change any employee’s status (exempt, non-exempt, part-time, full-time, employed or unemployed) at a whim (as you put it) at any time in Utah and most other states.
If the policy requiring salaried employees to keep detailed time logs was recently introduced, our best guess is that they switched exempt employees to non-exempt at that point.
A word to the wise. You certainly should tactfully raise this issue with your employers. However, confrontation is seldom effective, especailly if you wish to continue to be employed with this company, or receive a good reference from them. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Tammy
What about a local municipality changing an exempt employee to a non-exempt employee for an entire pay period? Our City has instituted this practice to make furlough days mandatory as unpaid holidays during these periods.
Posted by: Amelia
Hi Tammy! This would be unlawful if a private employer did it. However, the FLSA and FairPay regulations are federal laws. They do not apply to employees of state or local governments. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Leslie
I am a psychiatric social worker employed in a hospital. I work on a small team. Our unit was downsized and our total FTE’s were reduced. Just this week, they announced to us that we will now be hourly whereas we had been salaried. Like nursing staff, we will be “called out” when the census is low (as it has been very low). I gather this is all legal, but can they switch us back to salaried if things pick up? Can we apply for unemployment if we miss wages for days when the census was low? The nature of our jobs and duties have not changed. . . .
Posted by: Amelia
Hi Leslie~ Yes, as long as the change from exempt to non-exempt (or back) lasts for at least 3 months, under federal law it is considered permanent and is lawful.
There is no law that any employee must be treated as exempt, ever. Even the CEO could be paid hourly, if the company wished. Your employer could have unilaterally reduced your salary without any reduction in hours. However, they choose the more honorable path of making all social workers on the unit non-exempt, and paying you only for the time you worked. You can certainly file for unemployment for missed days of work. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Suz
I am a salaried employee in Kentucky. I typically work Monday-Friday, but during busy times will work overtime (which as an exempt employee I don’t get paid extra for). However, when I work weekends in addition to my work week, should I be forced to use a day of PTO for being off on a holiday? For example, I worked from June 22 to July 2 with no day off, and then for the July 3 holiday day, was forced to use a PTO day in order to get paid for the holiday. Is this kosher?
Posted by: Amelia
Hi Suz! Your employer is being a real stinker…but this is legal.
There is no law that an employer must provide paid holidays or PTO. If the employer does provide paid holidays or PTO, the employer sets the policies regarding them. The federal laws state that an exempt employee who works any portion of the week must be paid his or her full salary for the week. (There is an exception if the employee takes a full day off due to illness or for personal business.) So the law says that you must be paid for the entire week. But it permits the employer to count that time as PTO.
The employer’s statement that you are required to use a day of PTO to be paid for the holiday is not entirely correct. Even if you had no PTO time available, legally the employer would have to pay you for the entire week. However, they can have a company policy that you must use a day of PTO, or they can automatically deduct the PTO from your balance — as long as you receive your usual salary for the week. (They could also require that you work on the holiday.)
If you work for a large company, it is possible that the person processing payroll has no idea that you have been working 7 days per week. They simply put through one day of PTO for every exempt employee. If this is the case, you could certainly raise the issue tactfully with your supervisor or HR — but that may not change the answer.
Otherwise, as we noted above, your employer is a real stinker, and we would totally understand if you were looking for a better job. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Ann
I am an exempt employee, living in Texas. My company is about to announce that everyone is required to take a one week furlough. My question is this - I have vacation time earned, can my employer keep me from using a week’s vacation to cover my unpaid week?
Posted by: Amelia
Hi Ann! No, the company cannot be compelled to allow you to use your vacation time while on furlough. Employers have the right to schedule vacations at their convenience — not the employees.
In this case, the employer is putting workers on furlough to save money on payroll. If they pay you, they will no longer be saving money. It will defeat the whole purpose of furlough. (If they permit you to take vacation, they will also have to allow others to use their vacation while on furlough.) The best bet would be to request vacation time for a different week. HTH, and thanks for reading the blogs!~Amelia
Posted by: Cristie
Ok here is a tricky situation…my boyfriend is a salaried employee in Wyoming who has been forced to work outrageous hours and be on call 24/7 due to the economy and cute backs. What are the laws for overtime if any at all? As well as having to work these hours, the company recently told them that they are required to take a week of furlough days every quarter. Can this be split up into days so we don’t lose out on a full weeks pay at a time? As we understand it, the company has already deducted their furlough hours out of each pay period, regardless if they work it or not. We also are wondering if it is standard for salaried employees to have a set amount of hours reported on the pay stub, rather than the “actual” hours worked? We are new to being salaried and hope you can answer our questions
Thanks
Posted by: Amelia
Hi Cristie! It sounds as if your boyfriend is an exempt salaried employee. Everything you mention is fairly standard for an exempt employee — they are not entitled to overtime, ever. The employee is paid the same salary every week, whether he works 40 hours or 120 hours. The pay stub usually shows 40 hours, regardless of how many the employee actually works. (That just makes payroll processing easier, and since the employee is not entitled to overtime, there is no need for the company to accurately track hours worked.)
As discussed in the article above, no, your boyfriend cannot take a day or two of furlough here and there instead of a full week of furlough. An exempt employee who is furloughed for a few days in the pay period must be paid his entire weekly salary. The purpose of furloughing exempt employees for a full week is to save payroll — the employees are not entitled to any payment whatsoever for that week. That’s what a furlough is.
It seems unlikely that the furlough has been prorated and is being deducted from the employees’ salary spread over several weeks. (That would be illegal under federal law.) It is more likely that the employee’s salary has been reduced, permanently — which is legal. Check out the links below or search our archives for a better understanding of exempt employee status. And feel free to post any additional questions you might have. HTH, and thanks for reading the blogs!~ Amelia
Read more about this at:
http://www.dol.gov/esa/whd/regs/compliance/fairpay/fs17a_overview.htm
http://www.dol.gov/esa/whd/regs/compliance/fairpay/fs17g_salary.htm
Posted by: Lu
hi Amelia,
Great blog here, but can the company request that all employees take a week’s furlough, and then closer to the time, allow a couple of individuals work due to the projects they are working on? Can they treat individuals differently based on the jobs they do?
thanks
Posted by: Amelia
Hi Lu! Yes, a company can treat different employees differently, based on the jobs they do — especially when there is a valid business reason to do so. (If this were not the case, the company would have to pay every employee the same salary, just to cite one very obvious example.) It sounds as if there is a valid business reason for this action. If the company were making this decision based on race, color, sex, disabilit, religion, national ancestry, etc., that would be illegal discrimination. HTH, and thanks for reading the blogs!~ Amelia
Posted by: william
I am an exempt employee for a County in Minnesota. As a County employee would I be covered by FLSA? The County is requiring all non-union employees to take 6 furlough days for the year. Reading on the blog this seems to be a problem if not required to be done all in one week.
Posted by: Amelia
Hi william! No. The federal FLSA does not apply to federal, state or municipal employees. It primarily applies to businesses who engage in commerce between state lines — which is most private businesses. State law would apply, and most states do permit government employees to be put on unpaid furlough. HTH, and thanks for reading the blogs!~ Amelia
Posted by: reba sturles
I am classified as an exempt employee with a company in Texas the business is convience stores. My employer owns more than 300 stores, I “manage” one of the stores. During the course of a week I wear the hat of a clerk, for about a quarter of the time, and I work in excess of 50 hours a week, this past week I put in 71 clocked in hours. I get no overtime, and am under the constant threat that my pay will be cut if I do not remain on call 24/7. My question is Is this legal? What happens to a personal life? Time to clean the house, have an occasional dinner with my family,or even do the laundry. I was just off today and my telephone has rung eight times all work related. Since Christmas 2008 I have had one uninterrupted day off. Doing the math dividing my pay of $503.00 by 71 hours I do not make minimum wage for weeks such as this, which have become normal for this position that I hold.
Posted by: Amelia
Hi reba! This is a tough situation and you have our empathy. Unfortunately, yes, this is legal under both Texas and federal law (or in almost any other state.) Under federal law, an exempt employee must make at least $455 per hour before taxes — you satisfy that requirement. The fact that you are constantly taking calls from work supports the exempt status — your primary duties are those of a manager, not an hourly convenience store clerk. There is no limit to the number of hours that an employer can require an employee to work. In some industries, as in yours, it is normal for an exempt employee to work 50 to 70 hours per week. You are correct that this does not provide a good quality of life.
If you are in a position to train other staff members, that might cut down on the number of calls you receive and at least allow you to take uninterrupted days off. Our only other suggestion would be for you to look for a better job when the economy improves. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Shelly
This is a great source of information. Here is the situation/question - Our Connecticut based company (publicly traded on NYSE) has implemented 7 “furlough” days throughout the year - for the most part pairing them with traditional holidays. I am an exempt salaried employee. The company is not paying us for those furlough days. Is that legal ?
Posted by: Amelia
Hi Shelly! Thanks for the kind words! No, one-day unpaid furloughs for exempt employees are not permitted under the federal FLSA or Fair Labor Standards Act. Hourly employees need not be paid for furlough days. However, exempt employees must be paid the same weekly salary regardless of the quantity or quality of work performed that week. If the employee works any portion of the week, and is ready, willing and able to work the entire week, the exempt employee must be paid his or her full weekly salary. (The employer can require that the exempt employee use PTO for the furlough days, but must still pay the employee.) Different rules apply when the employee is absent due to illness, or for personal business.
In this case, it appears that the salaried employees are being treated as non-exempt employees. This would indicate that the employees never were exempt, and they would be entitled to payment for any overtime worked for the past 3 years. Our suggestion would be that you tactfully raise this issue with the employer, perhaps approaching it as, “I just don’t want this to create legal problems later.” If that doesn’t work, then wait until the first furlough day and file a complaint about unpaid wages or overtime with the US Department of Labor at http://www.dol.gov. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Nathaniel Merriweather
Hi
I am an exempt employee at a 501c3 nonprofit organization. The entire organization was asked to take 2 one week furloughs (one during the christmas/new year holidays and another week at the employees choosing). Recently, it was announced that 6 employees would have to take an additional furlough - this time these 6 employees would have take fridays off (reducing work/compensation time to 4 days a week) for an undetermined amount of time. I am curious if this legal. If not, what types of steps can these employees take as far as legal recourse?
Thanks,
NM
Posted by: Amelia
Hi Nathaniel! The two one-week furloughs are lawful. As long as the exempt employee does no work whatsoever during the payroll week, he or she need not be paid. However, asking exempt employees to take every Friday off without pay is not lawful. An exempt employee must be paid his or her full salary for any week in which the employee does any work at all, under the federal FLSA, the Fair Labor Standards Act.
If your employer is a state or local government agency, the FLSA may not apply. If it is a private non-profit entity, the the FLSA may very well apply.
It is also possible that the 6 people involved are salaried, but are non-exempt employees.
There are two actions that you can take. The first would be to contact the U.S. Department of Labor, Wage and Hour Division at http://www.dol.gov for their opinion on this situation. The second would be to file a wage claim with the U.S. Department of Labor (and/or your state department of labor) for any week in which you are paid less than your full salary. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Whitney
I am a full-time exempt employee for a mid-sized international company (publicly traded). Several months ago the company implemented what was entitled “FTE” days for exempt employees. Meaning, 1 day every pay period (2 weeks) we were required to be off on “furlough.” Our salaries were cut by 10% as well. There was an emphasis on the fact that no work was to be performed on the furlough days, that they would have to remain flexible (you could plan for them, but couldn’t necessarily count on taking them) and that for every 2 week pay cycle one week of billable time should add up to 32 rather than 40 hours.
My question is this, after my salary was reduced by 10%, I billed upwards of 90 hours every 2 weeks and was not able to use most of the “furlough” days. Is this legal?
Posted by: Amelia
Hi Whitney! Yes, this is entirely legal. An employer can reduce exempt employees salaries across the board — and that is what your employer has done.
There was actually no requirement for the employer to reduce the number of hours that the exempt employees worked, or to grant furlough days to exempt employees.
The only part of your question that is problematic is the fact that the employer seems to have stated that each 2 week pay cycle should have included 72 hours of work rather than 80. Ironically, when an employer reduces the salary for exempt employees, the employer is in a better position if the hours worked remain the same. So there is actually no problem with the fact that you are still working 90 hours every two weeks. (Hopefully your boss realizes this and will give you a larger salary increase when times are better.)
Again, it is the reduction in hours rather than the reduction in salary that is problematic. But as long as the salary reduction applies to all exempt employees, we see no legal problem here. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Tony C.
Hello,
Concerning pay definitions for exempt and non-exempt employees I have an employer who has most of his employees on a “base pay” with required hours. For example: If an employee is paid $2,000 per month and required to work 182 hours for the month and is short hours his pay will be deducted by the number of hours he is short. Lets say 5 hours short that would make his pay short $54.95 or $1,945.05 for the month instead of $2,000. But if the employee works 200 hours no addtional money is earned - is this legal?
Also, my employer is wanting to close down for 1-week each month unpaid and not allowing employees to use vacation during that time - is this legal?? If so how long a furlough can an employer put you on without pay or use of vacation?
Posted by: Amelia
Hi Tony! No, this form of payment is probably not lawful — but it depends upon which state you are in. Each state has different minimum wage and payroll laws. However, most employees in the U.S. are covered by the federal minimum wage and payroll law — and we are going to answer your question based on that. A salaried employee can be either exempt or non-exempt. Exempt employees must fall into one of 5 categories under the federal FLSA, based on their primary duties: Outside Sales, Computer Pros, Professionals, Executives and Administrators. Exempt employees are never entitled to overtime. However, they must be paid the same salary every week they work, even if they work fewer hours than expected.
Any employee can be paid on salary to make processing payroll easier. However, not every employee is exempt. A salaried non-exempt employee is basically an hourly employee. The employer must pay overtime at 1.5 times the employee’s average rate when the employee works more than 40 hours in the payroll week. In addition, the employee can be paid less when he or she works fewer hours. In your example above, the employee is paid about $10.99 per hour. An employee who worked 44 hours one week would be entitled to $439.60 salary for 40 hours, plus 4 hours at $16.49 per hour, or $65.96 for overtime. That makes the employee’s weekly earnings $505.56. (Note that under the FLSA, salary and overtime must be calculated weekly, even if they are paid bi-weekly or monthly.)
When an employer treats an exempt employee as non-exempt by docking his pay for working fewer hours, the employee is usually entitled to overtime for the past 2 years. If this is the case, file a wage complaint with the Wage and Hour Division of the U.S. Department of Labor at http://www.dol.gov.
However, your use of the term “base pay” suggests to us that these may be commissioned salespeople who are being paid a “draw” against commissions. If so, that changes the picture considerably.
Yes, the employer can close down for one week each month and not allow employees to use vacation time. As we noted in the article above, exempt employees need not be paid if they perform no work at all during the payroll week. Non-exempt employees are entitled to payment only for the hours they worked — in otherwords, no pay if the shut down is for the entire week. There is no limit to the number of weeks that the employer can put employees on furlough. An employer could put workers on furlough for 2 weeks, 10 weeks, or 52 weeks. Or, the employer could put workers on furlough forever, by shutting down the plant.
Any employee who is on furlough for one week or more should file for unemployment. Unfortunately, in some states if the employee returns to work after one week, they will not be entitled to any unemployment benefits. HTH, and thanks for reading the blogs!~ Amelia
Posted by: kim
I am an hourly employee and was told today that our entire staff would be on a two week furlough starting at end of business today. We have not been paid for hours worked this pay period and were told that we would not be paid next week on our usual pay day; leave the keys to the building and our alarm entry codes were deleted today. The BOD of our 501c3 organization located in South Carolina will use this time to determine what steps to take next. We were told bankruptcy of some type. Can they place us all on a two week furlough even though they have not paid any of the employees? This was all verbal and I requested those facts in writing, including the fact that they are not going to pay us for time already worked. This company does not hold back a pay period and they are in severe financial trouble. Is our furlough legal? Why do they not have to pay wages for all of their employees? Can we apply for unemployment on Monday?
I was told that there will be a letter issued by the organization’s lawyer on Monday.
In need of information in South Carolina.
Posted by: Amelia
Hi kim! These are two entirely separate issues. Yes, any employer can shut down for two weeks for finiancial reasons. If the employees do no work at all, there is no law that the employer must pay them for the two-week furlough. This is true for both hourly and salaried exempt employees. Many employers have done this during the past year, for economic reasons.
However, under the federal minimum wage laws, employees must be paid for all hours worked. It is unlawful for the employer to refuse to pay you and the other employees. You should immediately file a wage complaint with the U.S. Department of Labor at http://www.dol.gov. (In addition, you may want to sue the employer in small claims court for the unpaid wages.) In most areas, a state agency would assist you, but since South Carolina has no minimum wage law, you have little protection from the state.
Here’s the problem: even the U.S. Department of Labor cannot get blood out of a turnip. If the employer genuinely goes bankrupt or out of business, the employees simply become one more unpaid creditor. If there is a bankruptcy, you may eventually be paid — but it could be only 1/10 to 1/4 the amount you are owed.
An ethical employer does not permit employees to work, if the employer has no way to meet payroll. So this employer is showing that they are having severe financial problems, and that they are unethical. You should take two additional steps. First, file for unemployment benefits. Second, spend at least 40 hours per week looking for a paying job. At this point, even a minimum wage job is better than working for this unethical organization.
We suspect that this employer will close its doors and never reopen. If the employer does call you back to work, you should treat it as a temporary job, and be aware that you may not be paid for the hours worked. (In many cases, an employee who quits because the employer doesn’t pay them qualifies for unemployment benefits. So does an employee who is on furlough.) HTH, and feel free to post any additional questions!~ Amelia