CFR |
Code of Federal Regulations Pertaining to ESA |
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Chapter
V |
Wage and Hour Division, Department of Labor |
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Part
541 |
Defining and Delimiting the Exemptions for Executive,
Administrative, Professional, Computer and Outside Sales Employees |
- Section Number: 541.603
- Section Name: Effect of improper deductions from salary.
(a) 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.
(b) If the facts demonstrate that the employer has an actual
practice of
making improper deductions, 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. Thus, for example, if a manager at a
company facility routinely docks the pay of engineers at that facility
for partial-day personal 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.
(c) 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.
(d) If an employer has a clearly communicated policy that prohibits
the improper pay deductions specified in Sec. 541.602(a) and includes
a complaint mechanism, reimburses employees for any improper deductions
and makes a good faith commitment to comply in the future, 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, 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. 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.
(e) This section shall not be construed in an unduly technical
manner so as to defeat the exemption.
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