We would like to make a long term reduction in exempt workers' workweek. Will a corresponding reduction in salary violate the FLSA salary basis test?
Employers are generally permitted to make a prospective reduction in an exempt employee's salary as a result of a long-term change in work hours without violating the salary basis test. The U.S. Department of Labor (DOL) issued guidance that indicates long-term bona fide reductions in salary are permitted as long as the minimum salary requirement is still met. However, employers may not reduce an exempt employee's salary for short-term business needs on a day-to-day or week-to-week basis or retroactively reduce an employee's salary.
Unfortunately, the DOL guidance does not state how long the change in hours and pay must last to be considered bona fide. Therefore, employers should consult with an attorney and also seek guidance on related state law before implementing such practices.
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