An employer who makes improper deductions from salary shall
lose the exemption if the facts demonstrate that the employer did not intend to
pay employees on a salary basis. An actual practice of making improper
deductions demonstrates that the employer did not intend to pay employees on a
salary basis. The factors to consider when determining whether an employer has
an actual practice of making improper deductions include, but are not limited
to: the number of improper deductions, particularly as compared to the number
of employee infractions warranting discipline; the time period during which the
employer made improper deductions; the number and geographic location of
employees whose salary was improperly reduced; the number and geographic
location of managers responsible for taking the improper deductions; and
whether the employer has a clearly communicated policy permitting or
prohibiting improper deductions.
A. If
the facts demonstrate that the employer has an actual practice of making
improper deductions, then the exemption is lost during the time period in which
the improper deductions were made for employees in the same job classification
working for the same managers responsible for the actual improper deductions.
Employees in different job classifications or who work for different managers
do not lose their status as exempt employees. [Example: if a manager at a
company facility routinely docks the pay of engineers at that facility for
partial-day absences, then all engineers at that facility whose pay could have
been improperly docked by the manager would lose the exemption; engineers at
other facilities or working for other managers, however, would remain
exempt.]
B. Improper deductions
that are either isolated or inadvertent will not result in loss of the
exemption for any employees subject to such improper deductions, if the
employer reimburses the employees for such improper deductions.
C. If an employer has a clearly communicated
policy that prohibits the improper pay deductions specified in paragraph IV (A)
and includes a complaint mechanism, reimburses employees for any improper
deductions and makes a good faith commitment to comply in the future, then such
employer will not lose the exemption for any employees unless the employer
willfully violates the policy by continuing to make improper deductions after
receiving employee complaints. If an employer fails to reimburse employees for
any improper deductions or continues to make improper deductions after
receiving employee complaints, then the exemption is lost during the time
period in which the improper deductions were made for employees in the same job
classifications working for the same managers responsible for the actual
improper deductions. The best evidence of a clearly communicated policy is a
written policy that was distributed to employees prior to the improper pay
deductions by, for example, providing a copy of the policy to employees at the
time of hire, publishing the policy in an employee handbook or publishing the
policy on the employer's Intranet.
This section shall not be construed in an unduly technical
manner so as to defeat the exemption.