Salary Test for Exempt Employees

All three of the above exemptions require payment of a true salary:

  1. "Salary" is defined as agreed-upon periodic compensation, intended to cover a period of at least a week, equivalent to at least $684 per week,* that is not subject to reduction on the basis of quantity or quality of work performed.

  2. That means that if an employee does poor work (including damage to or loss of property), the employer cannot dock the employee's salary - if the employee violates a rule (other than a safety rule of major significance), the employer cannot dock their pay - if the employee misses a few hours in a day, a private employer cannot dock the salary (but a governmental employer can!).

    1. However, if in addition to the salary, the exempt employee receives additional pay such as a commission or bonus, such additional pay can be docked, consistent with a written wage deduction authorization agreement - see DOL opinion letters FLSA2006-24 and FLSA2006-24NA.

  3. Vacation: employers can dock the salary in units of a day at a time for personal absences.

  4. Sick days: employers can also dock the salary in units of a day at a time for health-related absences if the employer has a bona fide sick leave policy (at least five paid sick leave days per year – a minimum tenure requirement is permissible) - if the absences are covered by the FMLA, then partial-day deductions from salary are possible.

  5. Two varieties of unpaid suspensions:

    1. The salary may be reduced in units of a full day at a time in the case of suspensions without pay for infractions of workplace conduct rules, pursuant to a written policy that applies to all employees.
    2. Deductions in any amount of time can be done for violations of "safety rules of major significance" - minor rules do not satisfy that requirement, so if a salaried exempt employee violates less serious rules, find another way to discipline them, such as full-day suspensions as mentioned in point 1 above.

  6. Tougher rule applies in the case of absences due to jury duty, witness duty, or temporary military duty: if an employee works any part of a week and misses the rest of the week for jury, witness, or military duty, he or she must receive the full salary for the whole week, but if they miss a full week, no pay is due for that week; deductions from leave balances are allowed in any amount (see item 11 below).

  7. Same rule applies for unpaid holidays, furloughs, bad-weather days, and other occasions when work is unavailable to salaried exempt employees who are otherwise available for work: if the office is closed on a day that a salaried exempt employee would normally work, then partial-week deductions from pay are not allowed, but if the employee misses an entire week for such a reason, the salary may be reduced by that amount; deductions from leave balances are allowed in any amount (see item 11 below).

  8. Partial-day docking of salary should not be done by a private sector employer unless the FMLA applies to an absence, or the employer imposes a disciplinary suspension for violation of a safety rule of major significance.

  9. TWC takes the position that no written authorization is necessary under the Texas Payday Law for such deductions (based on DOL regulation 29 C.F.R. § 541.602(b)). However, no Texas court has ruled on that specific point, and there is always the chance that TWC could change its own rule on this issue. Accordingly, it may be prudent to go ahead and include such an item in a standard written wage deduction authorization agreement, as illustrated by item 12 in the sample wage deduction authorization agreement in this book. An alternative could be to grant a paid leave advance and deduct it later from future accruals, as long as the company's written paid leave policy provides for such offsets. A policy that does not address that issue can certainly be revised accordingly and distributed to all employees.

  10. A prorated reduction of the salary for the first week of work, and for the final week of work, is allowed under the FLSA and does not require written authorization from the employee (see 29 C.F.R. § 541.602(b)(6)).

  11. Partial-day docking of leave balances - DOL says it is permissible to dock leave balances for absences, as long as the salary itself is unaffected - however, docking leave balances for partial days missed can lead to morale problems if the employee feels that such a practice amounts to nickel-and-diming on the employer's part, particularly if the employee always works a lot of hours each week in any event - for compliance with the Texas Payday Law, ensure that any deductions from leave balances are consistent with the company's written paid leave policy.

  12. For more information on how the 2004 and 2020 DOL regulations changed the requirements for exemptions, see the article "Focus on the DOL White-Collar Exemption Regulations" in this book.

Outside Sales Representative

  1. Only a duties test applies - for an outside sales representative, the primary duty involves working away from the employer's principal place of business calling on customers and making sales.

  2. There is no minimum wage, overtime, or salary requirement.

  3. The only thing to keep in mind is to follow the commission pay agreement - failure to do so will violate both general contract law and most state wage payment laws.

Computer Professional

  1. There is a special exemption under FLSA section 213(a)(17) for "any employee who is a computer systems analyst, computer programmer, software engineer, or other similarly skilled worker, whose primary duty is --

    1. the application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications;

    2. the design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;

    3. the design, documentation, testing, creation, or modification of computer programs relating to machine operating systems; or

    4. a combination of duties described in subparagraphs (A), (B), and (C), the performance of which requires the same level of skills, and

    who, in the case of an employee who is compensated on an hourly basis, is compensated at a rate of not less than $27.63 per hour."

  2. The regulations (29 C.F.R. 541.400 and 541.401) exclude workers who build or install computer hardware or who are merely skilled computer operators; they make clear that the exemption applies only to the true software programming or design experts.

  3. A DOL letter ruling of December 4, 1998 (BNA, WHM 99:8201) states that this exemption does not include employees who "provide technical support for business users by loading and implementing programs to businesses' computer networks, educating employees on how to use the programs, and by aiding them in troubleshooting." In other words, "help desk" employees do not fit this exemption. See also DOL opinion letter FLSA2006-42 in this regard.

  4. Properly speaking, the exemption applies only to the very top experts in computer software, i.e., the ones who actually write the software programs, or who design, implement, and maintain a company's network software, intranet, or Internet presence.

  5. An employee who fits this exemption may be paid either a salary of at least $684 per week,* or on an hourly basis with no premium for overtime work, i.e., straight-time pay for all hours worked, as long as the hourly rate is at least $27.63 per hour.

* $455 per week if employed in the Commonwealth of the Northern Mariana Islands, Guam, Puerto Rico, or the U.S. Virgin Islands by employers other than the Federal government, or $380 per week if employed in American Samoa by employers other than the Federal government. The 2020 regulation provides that up to 10% of the salary can consist of non-discretionary bonuses or commissions.

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