Deductions for lost equipment may give salaried employees right to overtime pay
In a recent opinion letter, the US Department of Labor looked at whether employers may deduct from a salaried employee's wages to cover the cost of lost or damaged company equipment. In the March 10, 2006 opinion letter the Acting Administrator of the DOL's Wage & Hour Division advised that employers cannot dock the wages of employees who are exempt from the overtime pay requirements to recover the value of lost or damaged company issued equipment, such as cell phones or computers.
Specifically, the DOL was asked to consider whether an employer could make deduction from an employee's wages if the employee damaged company provided equipment, such as a laptop computer or cellphone. The opinion letter flatly says "No" to such deductions for all exempt employees, and warns that any such deduction from the wages of a non-exempt employee cannot reduce the employee below minimum wage.
The opinion letter notes that the regulations require exempt employees to receive their full salary, without reductions. "an exempt employee must receive the full salary for any week in which the employee performs any work." 29 C.F.R. 541.602(a). The letter also states that "The Wage and Hour Division (WHD) interprets these regulatory provisions to mean that if a particular type of deduction is not specifically listed in Section 541.602(b) [formerly section 541.118(a)] then that deduction would result in a violation of the 'salary basis' test."
The Department of Labor also said: "It is WHD's long-standing position that an exempt employee must actually receive the full predetermined salary amount for any week in which the employee performs any work unless one of the specific regulatory exceptions is met."
The opinion letter also looks at this kind of agreement for non-exempt employees, usually those paid on an hourly basis. Because the rules are different for non-exempt employees, this kind of charge to the employees is generally permitted. The catch, is that any deduction must always leave the employee with minimum wage.
OK - what does this mean? It looks like the Department of Labor is strongly taking the position that employers who charge their exempt employees for lost or damaged equipment run the risk of having to pay those employees overtime - even though the employees would otherwise be completely exempt from the overtime pay rules.
Given the DOL's view, an employer that had a policy or practice of making employees pay for lost or damaged equipment could lose the exemption, and owe the employees up to three years of back overtime pay. Under some circumstances, this would convert exempt employees (no right to overtime pay) into non-exempt employees (legally required to receive overtime pay).
Specifically, the DOL was asked to consider whether an employer could make deduction from an employee's wages if the employee damaged company provided equipment, such as a laptop computer or cellphone. The opinion letter flatly says "No" to such deductions for all exempt employees, and warns that any such deduction from the wages of a non-exempt employee cannot reduce the employee below minimum wage.
The opinion letter notes that the regulations require exempt employees to receive their full salary, without reductions. "an exempt employee must receive the full salary for any week in which the employee performs any work." 29 C.F.R. 541.602(a). The letter also states that "The Wage and Hour Division (WHD) interprets these regulatory provisions to mean that if a particular type of deduction is not specifically listed in Section 541.602(b) [formerly section 541.118(a)] then that deduction would result in a violation of the 'salary basis' test."
The Department of Labor also said: "It is WHD's long-standing position that an exempt employee must actually receive the full predetermined salary amount for any week in which the employee performs any work unless one of the specific regulatory exceptions is met."
The opinion letter also looks at this kind of agreement for non-exempt employees, usually those paid on an hourly basis. Because the rules are different for non-exempt employees, this kind of charge to the employees is generally permitted. The catch, is that any deduction must always leave the employee with minimum wage.
OK - what does this mean? It looks like the Department of Labor is strongly taking the position that employers who charge their exempt employees for lost or damaged equipment run the risk of having to pay those employees overtime - even though the employees would otherwise be completely exempt from the overtime pay rules.
Given the DOL's view, an employer that had a policy or practice of making employees pay for lost or damaged equipment could lose the exemption, and owe the employees up to three years of back overtime pay. Under some circumstances, this would convert exempt employees (no right to overtime pay) into non-exempt employees (legally required to receive overtime pay).
posted by Robert Rice | 2:27 PM
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