Does a company have to compensate non-exempt employees for absences due to COVID-19?
Whether the absences are due to infection, exposure or suspended operations or reduced employees' hours, the legal analysis for non-exempt or "hourly" employees is fairly straightforward. The Fair Labor Standards Act only requires employers to compensate non-exempt employees for time actually worked. This is also true if a company reduces hours because its revenue is suffering due to international restrictions. Employers, however, need to review their policies and benefit plans, where certain obligations still may apply.
What about deducting pay from exempt employees for absences?
Most FLSA exemptions require that the employee be paid on a salary basis. To be paid on a salary basis means the employee is paid a predetermined weekly salary of at least $684, regardless of how many hours they work in the workweek. In other words, if an exempt employee works one hour on Monday and takes the rest of the week off due to illness, then the employer may be required to pay her entire weekly salary. FLSA regulations allow employers to make deductions from exempt employee salaries for one or more full days occasioned by sickness or disability provided that the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for loss of salary occasioned by that sickness or disability. In plain English, if the employer has created a benefits plan that specifically allows for paid leave in the event of sickness or disability (i.e., paid vacation time, paid sick leave, general paid time off), the employer may "deduct" and substitute with these types of available paid leave in order to provide the regular salary.
Does a company have to pay exempt employees' entire salary even if it temporarily suspends business operations?
Maybe. If an exempt employee performs no work for an entire workweek, then the employer does not have to pay the employee his or her salary for that week. That means furloughing an exempt employee for an entire workweek relieves an employer of paying the employee for that week. On the other hand, the general rule is that if an exempt employee works part of a workweek and is furloughed for the rest of the week, he or she is entitled to be paid his or her entire salary for that workweek. But, there's a narrow exception to the rule that an exempt employee's salary can't be reduced based on the low quantity of available work. The FLSA does not prohibit employers from prospectively reducing an exempt employee's predetermined salary amount during an extended period of economic slowdown. Such a reduction in salary won't forfeit the employee's exempt status, as long as the employee's weekly predetermined salary is at least $684 per week. The U.S. Department of Labor has explained that such reductions in salary must be "bona fide and not used as a device to evade the salary basis requirements." It's also important to remember that once the employee's new salary is determined, it can't fluctuate week to week based on the quantity or quality of work. The Department of Labor has stated that such prospective reductions of salaries are intended only to address long-term business needs. Employers should utilize this exception only when they anticipate a prolonged economic downturn.
Paula Burkes, Business writer
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