A reader writes:
Everyone in our company was just informed that all full-time employees (it did not specify exempt or nonexempt) will be docked one day of pay in the month of November due to financial hardship. However, to make up for it, they are going to give us an extra PTO day to take in December if our manager approves the time off.
I could see them making everyone take a mandatory unpaid vacation day or something like that, but it seems odd that they would expect us to work all of our hours, but not pay us for one of the days worked.
While I am happy that I still have a position and this effort may save people from being laid off, I am just wondering if this a normal practice?
It’s not normal, and what’s more, it’s not legal.
I confirmed this with the wonderful Donna Ballman, my go-to employment attorney who has helped us out here before. (And if you haven’t ordered her new book, Stand Up For Yourself Without Getting Fired, order it now. It’s a very reader-friendly guide to your rights at work and how to handle it when your employer isn’t following the law.)
Donna confirms: “Not paying for all hours worked is illegal under the Fair Labor Standards Act if an employee is not exempt. Employees must be paid for all hours worked in any pay period. It might also be a violation of their state’s minimum wage laws if the state has its own laws. They are being paid zero for those hours worked. The plan to give a comp day the following month is not in compliance with the law. Comp time is not permitted under FLSA for private employers.”
Now, it gets trickier when it comes to the exempt workers. (And if you’re baffled by all this talk of exempt and non-exempt, here’s a quick explanation: The government classifies all workers as exempt or non-exempt. Non-exempt workers must be paid overtime for any hours over 40 they work in a single week. Exempt workers are exempt from overtime requirements — but they must be paid the same salary every week, if they worked any portion of it, with a few narrow exceptions. Whether you are exempt or non-exempt isn’t up to your employer; it’s determined by how the government classifies the type of work you do. You can read more here.)
Okay, so back to exempt workers. Donna explains that an employer can reduce an exempt worker’s salary as long as (a) it’s not done retroactively, and (b) your pay isn’t reduced below $455/week (which is the minimum to quality as an exempt worker). But – and here’s where your employer has gone wrong — if it’s only reduced for a week rather than being a long-term change, then your employer can probably lose that exemption … meaning those workers are no longer considered exempt and suddenly are owed overtime pay for any hours they’ve worked over 40/week. And they’re not just owed that overtime pay in the future; they could be owed it for the work they’ve done in the past too. In other words, by doing this one-time pay docking, your employer is saying “we’re no longer treating you as exempt workers” and thus could be liable for all that overtime pay.
Wondering why it would be allowed if your pay cut were permanent instead of short-term? It’s because employers are allowed to change people’s pay based on long-term business needs (for instance, reassessing the value of your work, demoting you, or simply making permanent salary cuts across the board). But the Department of Labor says that “deductions from predetermined pay occasioned by day-to-day or week-to-week determinations of the operating requirements of the business constitute impermissible deductions from the predetermined salary and would result in loss of the exemption.” An overall cut to someone’s salary is allowed because it “reflects the long-term business needs, rather than a short-term, day-to-day or week-to-week deduction from the fixed salary for absences from scheduled work occasioned by the employer or its business operations.”
Donna adds, “The better practice for exempt employees would probably be to ask for volunteers (and they must really be volunteers) to take a day off for personal reasons. Then they wouldn’t have to pay for that day for any volunteers. This employer will likely be committing a serious violation of FLSA if they make people, exempt or non-exempt, work without pay for a day.”