Employment Law Cases

The carrot and the stick are the oldest management tools known to humankind.  Sometimes, business leaders want to use money (one of the primary carrots) as a stick by withholding from employees as an inducement to get behavior they want. In the wage and hour world, these sorts of tactics can create legal problems. Some of the legal problems that can arise are wage payment claims for current employees and failure to pay wages appropriately claims for terminated employees. Although those issues are troubling, the focus today is on using money to manage (or control) employees exempt from overtime under the Fair Labor Standards Act. Here are two quick tips to be sure you are not falling into the “Money Management” syndrome:

1.         Don’t require exempt employees to take vacation time when they leave early or come in late: Federal wage and hour law requires employers to pay exempt employees a salary. For your compensation system to meet that test, you may not make deductions from an employee’s salary for a partial day absence. Be careful here, if you require the employee to take vacation (or paid time off) for these partial day absences, you are violating the law as well.
 
2.         Don’t vary the amount the employee is paid (increase and decrease) based on the amount of time the employee works for the amount of work produce: Many employers want to incentivize their employees by giving more money for more work and take away money as a form of punishment. Although increasing a salary on this basis is proper under wage and hour law, decreasing the compensation is not.

In the end, the reason you make employees exempt is so you don’t have to pay them overtime. The trade off is that the employee is entitled to a consistent salary basis of payment. If you violate this salary basis of payment, then you lose the exemption and you could owe thousands of dollars in overtime compensation plus penalties and attorney’s fees. Money is a great motivator. It can’t be a manager for your exempt employees.