The U.S. Department of Labor recently issued an opinion letter on the topic of pro-rated salaries for exempt employees.
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WAGE AND HOUR UPDATE
Pro-Ration of Minimum Salary for Part-Time
Exempt Employees Disallowed
The U.S. Department of Labor recently issued an opinion letter on the topic of pro-rated salaries for exempt employees.
An employer inquired whether it is an acceptable practice to pro-rate the minimum allowable salary of an exempt employee to reflect his 20 hour per week part-time status, by paying the worker $15,000. In a letter dated February 14, 2008, the DOL responded that salary pro-ration is not allowed.
The most common exempt classifications are executive, administrative, and professional. Properly classified exempt employees are not entitled to overtime and are exempt from various other wage and hour rules. To qualify, exempt workers must be paid a minimum salary set by law, and also perform certain defined duties.
Under federal law, exempt employees must be paid a minimum salary of $23,660 annually, or $455 per week. This minimum amount must be paid even if the employee works part time. An employer wishing to pay an employee less than the minimum would have to classify the worker as a non-exempt employee. (Note: employers may pay non-exempt employees on a salary basis rather than hourly, but overtime and other wage and hour issues--especially in California--can become very tricky. Check with legal counsel before doing so.)
In California the minimum salary is higher: $33,280 or $640 per week. As under federal law, payment below the statutory minimum would cause the employee to lose exempt status.
Employers are reminded that paying the minimum salary does not necessarily qualify employees for exempt status. Under both state and federal law, the employee must also meet a "duties test" that focuses on the job duties of the employee.
For more details: Link to the full DOL opinion letter.
Need more help sorting out the rules for exempt classifications?
Ask for our complimentary exemption chart. (Email: cwo@barkerolmsted.com)
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More Legal Update articles.
Download entire April Legal Update in PDF format.
This article is intended as a brief overview of the law and are not intended to substitute as legal advice. Any questions or concerns regarding any statute or case law should be addressed to a licensed attorney. Copyright © 2008 by Barker Olmsted & Barnier, APLC. San Diego, California. All rights reserved.
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