Mass-Peculiarities: An Employers Guide to Wage & Hour Law in the Bay State 2022 Edition

88 | Massachusetts Wage & Hour Peculiarities, 2022 ed. © 2022 Seyfarth Shaw LLP leave banks in less than full-day increments are permissible, whereas partial-day deductions from salary are not permitted. 482 An exempt employee who does not have accrued leave benefits or who has a negative balance in his or her leave bank must still receive full salary for any day in which the employee is willing and able to work, and on any day in which he or she actually performs work. 483 Employers should be cognizant of certain pitfalls associated with deductions from leave banks. If a leave bank or vacation policy is not carefully drafted and administered, deductions for negative leave may in certain circumstances lead to inadvertent violations of the salary basis test. For example, if an exempt employee performs some work (i.e., checks and responds to e-mails) during a “vacation day,” that action may cause the day to be considered a partial-day, rather than a full-day, absence. If a deduction is made from the employee’s leave bank for that “vacation day” and the deduction causes the employee to accrue a negative leave balance, the employer cannot recoup the negative leave balance without subjecting the employee to a pay deduction for a partial-day absence with possible adverse consequences for the exempt employee status. A policy or practice of such deductions may violate the requirements of the salary basis test and, as explained below, could potentially destroy the exempt status of part or all of a company’s exempt workforce. Therefore, if an employee has taken more leave than he or she has actually accrued under the employer’s plan, it is not advisable for the employer to attempt to recoup the negative leave balance from the employee’s salary, including from the employee’s final paycheck. (6) Responses to Downturns in Business: Reductions in Pay and Furloughs During downturns in business, an employer may look for ways to cut costs without reducing its workforce by decreasing the salary and hours of exempt employees. For example, an employer may seek to reduce employees’ workweeks to four days per week and implement a corresponding 20 percent reduction in salaries. Although the law regarding reductions in an exempt employee’s work schedule and pay remains somewhat unsettled, courts have held that prospectively reducing an employee’s salary and work schedule does not destroy the employee’s exempt status, so long as such adjustments are not a “sham” meant to circumvent the overtime laws. 484 Such adjustments must be relatively infrequent and remain in effect for a substantial period of time. 485 Due to the complexity of the law in this area, employers should consult legal counsel prior to implementing any such adjustments to an exempt employee’s pay and schedule to minimize the risk of violating the salary basis test. 482 DOL Wage & Hour Opinion Let ter FLSA2009-18 (Jan. 16, 2009) (“Employers can, however, make deduct ions for absences from an exempt employee’s leave bank in hourly increment s, so long as the employee’s salary is not reduced.”). 483 DOL Wage & Hour Opinion Let ter FLSA2009-2 (Jan. 14, 2009). 484 See Havey v. Homebound Mortg., Inc. , 547 F.3d 158, 167 (2dCir. 2008) (pract ice of adjust ing salaries prospect ively on a quarterly basis based on employees’ performance in the prior quarter did not violate salary basis test ); Archuleta v. Wal-Mart Stores, Inc. , 543 F.3d 1226, 1231 (10th Cir. 2008) (adjustment s in salary andwork schedule where average t ime between adjustment s exceeded eleven months did not violate salary basis test ). 485 Archuleta , 543 F.3d 1226; but see Thomas v. Cnty. of Fairfax, Virginia , 758 F. Supp. 353, 361 (E.D. Va. 1991) (pract ice that resulted in changes to employees’ pay rates and salaries in every pay period violated salary basis test ).