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HR Support on the FLSA Salary Basis Test
Editor's Note: Docking exempt employees' salaries can sometimes prove quite costly.
Overview: The most frequently applied employee classification exemptions from the overtime requirements of the Fair Labor Standards Act (FLSA) all have a single requirement in common: to qualify, employees must be paid on a salary basis. This prerequisite is often referred to as the salary basis test.
An employee generally will satisfy the salary basis test if:
- The employee is regularly paid a set amount of compensation of at least $455 per week; and
- The amount of compensation is not reduced because of the quality or quantity of the employee's work.
The second requirement trips up some employers, who mistakenly assume that they can dock an exempt employee's salary for infractions such as reporting to work late or failing to meet production quotas.
As with most things involving the FLSA, there are many exceptions and variations to the basic rule.
Trends: For many years, employers that violated the salary basis test jeopardized their employees' FLSA-exempt status, leaving themselves vulnerable to claims for years of unpaid overtime.
But in 2004, the U.S. Department of Labor amended its FLSA regulations with a "safe harbor" provision that makes it easier for well-intentioned employers to correct salary-basis errors without forfeiting their employees' exempt status.
More and more employers are adopting workplace policies that allow them to take advantage of the safe harbor.
Michael Cardman, Legal Editor
Latest items in Salary Basis Test
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Unusual Compensation Plan Did Not Invalidate FLSA Exemption, 3rd Circuit Rules
An employer may prorate the base pay of a salaried employee without forfeiting the employee's exemption from the overtime requirements of the Fair Labor Standards Act (FLSA), as long as it covers the shortfall with additional premium compensation, the 3rd Circuit Court of Appeals held in Sander v. Light Action.
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Employee Classification: Washington
In-depth review of the spectrum of Washington employment law requirements HR must follow in respect to employee classification.
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Employee Classification: District of Columbia
In-depth review of the spectrum of District of Columbia employment law requirements HR must follow with respect to employee classification.
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Employee Classification: Wisconsin
In-depth review of the spectrum of Wisconsin employment law requirements HR must follow with respect to employee classification.
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Can an employer dock a salaried employee's pay if the employee shows up late or leaves early?
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Employee Classification: Hawaii
In-depth review of the spectrum of Hawaii employment law requirements HR must follow with respect to employee classification.
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May an employer make deductions from its exempt employees' bonuses?
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Classify an Employee Under the FLSA
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Reclassify an Employee With Evolving Job Duties
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Employee Classification
The classification of employees as exempt or nonexempt under the Fair Labor Standards Act (FLSA) is one of the most complex and difficult issues in federal wage and hour law. This section assists HR professionals in determining whether employees qualify for any of the exemptions from the FLSA's overtime and/or minimum wage requirements.
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HR guidance on complying with the salary basis test of the Fair Labor Standards Act.