January 15, 2009
This is in response to your request for an opinion regarding whether your
client’s proposed staffing adjustment policy affects its employees’ exempt
status under section 13(a)(1) of the Fair Labor Standards Act (FLSA).
Your client proposes occasionally reducing the hours worked by exempt employees
due to short-term business needs (e.g., low patient census). In such
cases, the employer offers “voluntary time off” (VTO), where employees may,
at their option, use paid annual, personal, or vacation leave, but continue
to accrue employment benefits. The employer approves VTO on a first-come,
first-served basis. If there are insufficient volunteers for VTO, the employer
requires “mandatory time off” (MTO) under a seniority-based rotational method.
Exempt employees required to take MTO may use accrued paid leave or take unpaid
MTO. If the employee elects not to use accrued paid leave or does not have
sufficient accrued paid leave to cover the VTO or MTO, the employer deducts
the amount equal to the VTO or MTO from the employee’s salary, if it is shorter
than one workweek. For unpaid VTO or MTO lasting an entire workweek, the
employer does not pay the salary for that pay period. Salaried exempt employees
may take VTO or be assigned MTO in one-day increments.
Section 13(a)(1) of the FLSA exempts from minimum wage and overtime pay “any
employee employed in a bona fide executive, administrative, or professional
capacity” as defined in 29 C.F.R. Part 541. An employee qualifies for exemption
if the duties and salary tests are met. You ask that we assume the employees
meet the duties test. We also assume the employees in question receive at
least $455 per week. See 29
C.F.R. § 541.600. Under 29
C.F.R. § 541.602(a),
[a]n employee will be considered to be paid
on a “salary basis” . . . if the employee regularly receives each
pay period . . . a predetermined amount constituting all or part
of the employee’s compensation, which amount is not subject to reduction because
of variations in the quality or quantity of the work performed. . . .
An employee is not paid on a salary basis if deductions from the employee’s
predetermined compensation are made for absences occasioned by the employer
or by the operating requirements of the business. If the employee is ready,
willing and able to work, deductions may not be made for time when work is
It is our opinion that salary deductions due to a reduction of hours worked
for short-term business needs do not comply with § 541.602(a) because
they result from “the operating requirements of the business.” 29 C.F.R.
§ 541.602(a). Thus, “[i]f the employee is ready, willing and able to
work, deductions may not be made for time when work is not available.”
Id . Deductions
from the fixed salary based on short-term business needs are different from
a reduction in salary corresponding to a reduction in hours in the normal
scheduled work week, which is permissible if it is a bona fide reduction not
designed to circumvent the salary basis requirement, and does not bring the
salary below the applicable minimum salary. See
Field Operations Handbook § 22b00; Wage and Hour Opinion
(June 25, 2004) (“[R]ecurrent changes in the normal scheduled workweek . .
. more likely would appear to be designed to circumvent the salary basis requirement.”).
Unlike a salary reduction that reflects a reduction in the normal scheduled
work week and is not designed to circumvent the salary basis requirement,
deductions from salary due to day-to-day or week-to-week determinations of
the operating requirements of the business are precisely the circumstances
the salary basis requirement is intended to preclude. Therefore, in this
instance, salary deductions due to MTO lasting less than a workweek violate
the salary basis requirement and may cause the loss of exempt status.
The employer is not, however, required to pay the salary for MTO of a full
workweek. See 29 C.F.R. § 541.602(a) (“Exempt employees need not be
paid for any workweek in which they perform no work.”).
Section 541.602(b)(1) states that “[d]eductions from pay may be made when
an exempt employee is absent from work for one or more full days for personal
reasons.” Salary deductions, therefore, may be made when exempt employees
voluntarily take time off for personal reasons, other than sickness or disability,
for one or more full days. For instance, an exempt employee paid $500 per
week on a salary basis may take VTO for personal reasons for four days in
a workweek and receive one fifth of the salary. The employee’s decision to
take VTO, however, must be completely voluntary and not “occasioned by the
employer or by the operating requirements of the business.” 29 C.F.R. § 541.602(a)
This opinion is based exclusively on the facts and circumstances described
in your request and is given based on your representation, express or implied,
that you have provided a full and fair description of all the facts and circumstances
that would be pertinent to our consideration of the question presented. Existence
of any other factual or historical background not contained in your letter
might require a conclusion different from the one expressed herein. You have
represented that this opinion is not sought by a party to pending private
litigation concerning the issues addressed herein. You have also represented
that this opinion is not sought in connection with an investigation or litigation
between a client or firm and the Wage and Hour Division or the Department
We trust that this letter is responsive to your inquiry.
Alexander J. Passantino
* Note: The actual name(s)
was removed to preserve privacy in accordance with 5 U.S.C. § 552(b)(7).
Unless otherwise noted, any statutes, regulations, opinion letters, or other
interpretive material cited in this letter can be found at .