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Department of Labor Publishes "Sample Salary Basis Policy" under New Overtime Regulations

By Paul J. Siegel
  • September 22, 2004

Among the laudable goals addressed by the revised Fair Labor Standards Act "white collar" regulations is the elimination of burdensome and unfair class actions based upon minimal violations of the complex salary basis rules for exempt status. Prior to issuance of the revised regulations, salary deductions due to absences of less than a full work day or because of the quality or quantity of work often led to class actions alleging that a broad class of otherwise exempt employees were transformed into non-exempt workers because they were not paid on a salary basis. These costly claims were especially unfair because they often arose from errors made by lower-level management or payroll personnel. The revised regulations limit such class actions, especially where a "safe harbor" policy is adopted.

Both under the prior regulations and the new regulations, it is improper for an employer to make a partial-day deduction because, for example, a salaried exempt employee is tardy, the facility closed in mid-day due to inclement weather, the employee elected to attend a mid-day parent-teacher conference, or the employee participated in jury service for part of a workweek. Employers can make deductions from an employee's salary due to absences of a full workday or more occasioned by illness, vacation, or personal reasons.

Under the revised regulations, the exemption may be lost during the time period when improper deductions were made, but the effect is limited to employees in the same job classification as the worker who suffered the deductions, and those who work for the same managers responsible for making the improper deductions. Isolated or inadvertent improper deductions will not result in the loss of the exempt status if the employer reimburses the employee upon receiving notice of the improper deduction.

For this protection to apply, an employer promptly must address improper deductions. This process is similar to the protocol enunciated by the Supreme Court in avoiding liability for sexual and other forms of workplace harassment. Employers must publish a policy advising employees of the prohibition against improper deductions and an easy-to-use complaint resolution procedure. Jackson Lewis has developed a sample policy that is available from the Wage and Hour Practice Group (see below).

The Department of Labor has published a short-form policy, entitled "SAMPLE SALARY BASIS POLICY."

Jackson Lewis has developed a sample "safe harbor" policy to avoid loss of exempt status and limit employer exposure to overtime liability. If you would like a copy of the sample policy, contact the Jackson Lewis attorney with whom you regularly work, or Paul Siegel or Lee Schreter.

©2004 Jackson Lewis P.C. This material is provided for informational purposes only. It is not intended to constitute legal advice nor does it create a client-lawyer relationship between Jackson Lewis and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material. This material may be considered attorney advertising in some jurisdictions. Prior results do not guarantee a similar outcome.

Reproduction of this material in whole or in part is prohibited without the express prior written consent of Jackson Lewis P.C., a law firm that built its reputation on providing workplace law representation to management. Founded in 1958, the firm has grown to more than 900 attorneys in major cities nationwide serving clients across a wide range of practices and industries including government relations, healthcare and sports law. More information about Jackson Lewis can be found at

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