(a) An employee will be considered to be paid ``on a salary basis''
within the meaning of the regulations if under his employment agreement
he regularly receives each pay period on a weekly, or less frequent
basis, a predetermined amount constituting all or part of his
compensation, which amount is not subject to reduction because of
variations in the quality or quantity of the work performed. Subject to
the exceptions provided below, the employee must receive his full salary
for any week in which he performs any work without regard to the number
of days or hours worked. This policy is also subject to the general rule
that an employee need not be paid for any workweek in which he performs
no work.
(1) An employee will not be considered to be ``on a salary basis''
if deductions from his predetermined compensation are made for absences
occasioned by the employer or by the operating requirements of the
business. Accordingly, if the employee is ready, willing, and able to
work, deductions may not be made for time when work is not available.
(2) Deductions may be made, however, when the employee absents
himself from work for a day or more for personal reasons, other than
sickness or accident. Thus, if an employee is absent for a day or longer
to handle personal affairs, his salaried status will not be affected if
deductions are made from his salary for such absences.
(3) Deductions may also be made for absences of a day or more
occasioned by sickness or disability (including industrial accidents) if
the deduction is made in accordance with a bona fide plan, policy or
practice of providing compensation for loss of salary occasioned by both
sickness and disability. Thus, if the employer's particular plan, policy
or practice provides compensation for such absences, deductions for
absences of a day or longer because of sickness or disability may be
made before an employee has qualified under
such plan, policy or practice, and after he has exhausted his leave
allowance thereunder. It is not required that the employee be paid any
portion of his salary for such days or days for which he receives
compensation for leave under such plan, policy or practice. Similarly,
if the employer operates under a State sickness and disability insurance
law, or a private sickness and disability insurance plan, deductions may
be made for absences of a working day or longer if benefits are provided
in accordance with the particular law or plan. In the case of an
industrial accident, the ``salary basis'' requirement will be met if the
employee is compensated for loss of salary in accordance with the
applicable compensation law or the plan adopted by the employer,
provided the employer also has some plan, policy or practice of
providing compensation for sickness and disability other than that
relating to industrial accidents.
(4) Deductions may not be made for absences of an employee caused by
jury duty, attendance as a witness, or temporary military leave. The
employer may, however, offset any amounts received by an employee as
jury or witness fees or military pay for a particular week against the
salary due for that particular week without loss of the exemption.
(5) Penalties imposed in good faith for infractions of safety rules
of major significance will not affect the employee's salaried status.
Safety rules of major significance include only those relating to the
prevention of serious danger to the plant, or other employees, such as
rules prohibiting smoking in explosive plants, oil refineries, and coal
mines.
(6) The effect of making a deduction which is not permitted under
these interpretations will depend upon the facts in the particular case.
Where deductions are generally made when there is no work available, it
indicates that there was no intention to pay the employee on a salary
basis. In such a case the exemption would not be applicable to him
during the entire period when such deductions were being made. On the
other hand, where a deduction not permitted by these interpretations is
inadvertent, or is made for reasons other than lack of work, the
exemption will not be considered to have been lost if the employer
reimburses the employee for such deductions and promises to comply in
the future.
(b) Minimum guarantee plus extras. It should be noted that the
salary may consist of a predetermined amount constituting all or part of
the employee's compensation. In other words, additional compensation
besides the salary is not inconsistent with the salary basis of payment.
The requirement will be met, for example, by a branch manager who
receives a salary of $155 or more a week and in addition, a commission
of 1 percent of the branch sales. The requirement will also be met by a
branch manager who receives a percentage of the sales or profits of the
branch, if the employment arrangement also includes a guarantee of at
least the minimum weekly salary (or the equivalent for a monthly or
other period) required by the regulations. Another type of situation in
which the requirement will be met is that of an employee paid on a daily
or shift basis, if the employment arrangement includes a provision that
the employee will receive not less than the amount specified in the
regulations in any week in which the employee performs any work. Such
arrangements are subject to the exceptions in paragraph (a) of this
section. The test of payment on a salary basis will not be met, however,
if the salary is divided into two parts for the purpose of circumventing
the requirement of payment ``on a salary basis''. For example, a salary
of $200 in each week in which any work is performed, and an additional
$50 which is made subject to deductions which, are not permitted under
paragraph (a) of this section.
(c) Initial and terminal weeks. Failure to pay the full salary in
the initial or terminal week of employment is not considered
inconsistent with the salary basis of payment. In such weeks the payment
of a proportionate part of the employee's salary for the time actually
worked will meet the requirement. However, this should not be construed
to mean that an employee is on a salary basis within the meaning of the
regulations if he is employed occasionally for a few days and is paid a
proportionate part of the weekly salary when so employed. Moreover, even
payment of the full weekly salary under such circumstances would not
meet the requirement, since casual or occasional employment for a few
days at a time is inconsistent with employment on a salary basis within
the meaning of the regulations.
[38 FR 11390, May 7, 1973, as amended at 40 FR 7092, Feb. 19, 1975]
Effective Date Note: Paragraph (b) in Sec. 541.118 was revised at 46
FR 3014, Jan. 13, 1981. In accordance with the President's Memorandum of
January 29, 1981 (46 FR 11227, Feb. 6, 1981), the effective date was
postponed indefinitely at 46 FR 11972, Feb. 12, 1981.
The text of paragraph (b) set forth above remains in effect pending
further action by the issuing agency. The text of the postponed
regulation appears below.
Sec. 541.118 Salary basis.
* * * * *
(b) Minimum guarantee plus extras. It should be noted that the
salary may consist of a predetermined amount constituting all or part of
the employee's compensation. In other words, additional compensation
besides the salary is not inconsistent with the salary basis of payment.
The requirement will be met, for example, by a branch manager who
receives a salary of $250 or more a week and in addition, a commission
of 1 percent of the branch sales. The requirement will also be met by a
branch manager who receives a percentage of the sales or profits of the
branch, if the employment arrangement also includes a guarantee of at
least the minimum weekly salary (or the equivalent for a monthly or
other period) required by the regulations. Another type of situation in
which the requirement will be met is that of an employee paid on a daily
or shift basis, if the employment arrangement includes a provision that
the employee will receive not less than the amount specified in the
regulations in any week in which the employee performs any work. Such
arrangements are subject to the exceptions in paragraph (a) of this
section. The test of payment on a salary basis will not be met, however,
if the salary is divided into two parts for the purpose of circumventing
the requirement of payment ``on a salary basis''. For example, a salary
of $300 in each week in which any work is performed, and an additional
$55 which is made subject to deductions which are not permitted under
paragraph (a) of this section.
* * * * *
