Managing intermittent FMLA leave has many challenges for employers, not the least of which is handling the issue of compensation for exempt employees taking such leave. Since FMLA leave is generally unpaid, yet salaried exempt employees are entitled to their salary regardless of hours worked, how should you proceed when an exempt employee takes intermittent FMLA leave?
In a CER webinar titled “FMLA Intermittent and Reduced Schedule Leave: How to Stop Abuse and Overcome Compliance Challenges,” Drew L. Alexis outlined the answer to this very question. Here’s what he had to say on the matter:
“There are some unique compensation rules that deal with exempt employees. Obviously we know that FMLA leave is generally unpaid. And we also know that other rules require that salaried executive, administrative, professional, or computer employees are generally paid based on a salary-basis test and a salary-level test which require a certain salary paid every week, regardless of the number of hours worked in the workweek. (That’s distinguishing them from hourly employees).
“Deductions from wages under certain circumstances, based on hours worked, of course can jeopardize the classification of a position as exempt and the Department of Labor has a unique rule for the FMLA that basically indicates that if an employer does treat FMLA time worked intermittently or, for an employee working a reduced schedule, if they reduce the salary of an exempt employee based on intermittent or reduced leave schedule under the FMLA, the employee does not lose the FLSA exemption. So those kind of salary deductions can be made without risking claims for overtime from the employee.”
Compensating Exempt Employees Out on Intermittent FMLA Leave: What are Your Options?
When tackling the issue of determining the correct compensation for exempt employees on intermittent FMLA leave or on reduced schedule leave, what are your options?
- Convert the exempt employees to hourly employees during the period that the intermittent FMLA leave is being sought. You will still be meeting your FLSA obligations this way.
- Keep the exempt employees as salaried and make appropriate adjustments to the salary on the basis of the employee’s regular workweek and hourly rate. You do this by applying their hourly rate to the missed hours in the workweek.
The second option is better, but it raises the question of determining the hourly rate for the exempt employee. Typically, salaried employees are told either an annual, monthly, or weekly salary in their offer letter – it is not typically communicated as an hourly rate (though if you did communicate an hourly rate, use this figure). In these cases where the hourly rate is not in the offer letter, you can next look to the pay statement, which may state an hourly rate attributable to the compensation for that exempt employee.
“If neither the pay statement nor the offer letter confirm the hourly rate then you really need to have some conversation with the employee about what hourly rate you intend to apply, rationale for determining that hourly rate, and you need to identify that in a written agreement at the time that your employee is scheduled to take this intermittent or reduced leave schedule so that it’s clear what compensation effect will be.” Alexis advised.
The second option still is imperfect, however, because we typically don’t have records of hours worked for exempt employees. To solve this, you can track these hours in general for purposes of intermittent FMLA leave administration. Alternatively, if you haven’t done that, then you must agree with the employee what their “normal” schedule or average hours worked will be – because you’re going to both need to agree on the hourly rate and what hours are not being paid. Be sure to document this agreement in writing.
For more information on calculating compensation for exempt employees on intermittent FMLA leave, order the webinar recording. To register for a future webinar, visit http://catalog.blr.com/audio.
Attorney Drew L. Alexis is Of Counsel with Los Angeles-based Kinaga Law Firm. He represents management in a wide range of employment disputes before federal and state courts and administrative agencies, including in the areas of leave of absence management, discrimination, harassment and retaliation, wrongful termination, and wage & hour claims.
Seems like a lot of employers forget that exempt status isn’t necessarily indefinite–and that their actions can change a position from exempt to nonexempt.
Seems like a lot of employers forget that exempt status isn’t necessarily indefinite–and that their actions can change a position from exempt to nonexempt.