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Follow DOL Guidance When Reducing Salaries During the Pandemic

salary-reduction

The Basic Rules

Under the federal Fair Labor Standards Act (FLSA), an employer can generally reduce exempt employees’ regular salary for COVID-19-related reasons. However, the reduction cannot be made after the fact or based on the employer’s day-to-day or week-to-week needs, according to the DOL.

“In other words, exempt employees must be paid their predetermined salary for any workweek in which the employee provided any services,” said Lisa Reimbold, an attorney with Clark Hill in Los Angeles “As such, any pay reduction for an exempt employee can only apply to future workweeks.”

The FLSA requires most businesses to pay employees 1 1/2 times their regular hourly rate for hours worked in excess of 40 in a workweek, unless employees fall under an exemption. The most common exemptions are administrative, executive and professional, which are collectively called white-collar exemptions.

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