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November 15, 2010
Defining Salary-Basis for Overtime Exempt Employees

How is "salary" defined to meet the standards of the Fair Labor Standards Act (FLSA) for overtime-exempt status?

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A salary is a fixed base weekly salary that meets the minimum base line dollar amount under federal, and sometimes state, laws. To meet the qualifications for the employee to be overtime exempt, the salary cannot be subject to reduction due to quantity/quality of the work. The salary is to cover the entire amount of the person's job and not fluctuate downward.

In a BLR webinar titled "Advanced Exemption Audits: Evaluate Your Overtime Classifications Now To Avoid Costly Trouble Later," Mary Topliff, Esq., outlined this requirement and how a salaried employee meets the qualifications.

To meet the qualifications, deductions from weekly salary are only appropriate in full-day increments, which would be okay for employee-requested absences, but not okay for employer-required absences. If this requirement is not met, then the employee may not qualify for the overtime-exempt status. This is especially relevant around office closures, and employers need to be aware of this.

Additionally, for the salaried employee to qualify as overtime-exempt, deductions from weekly salary in partial day increments are almost never okay. The only exception to this is when an employee is taking intermittent leave under the Family and Medical Leave Act (FMLA).

Deductions from vacation time, sick time, or a PTO banks are not the same as a deduction from pay. These can be charged in partial day increments without changing the status of the employee as it relates to overtime-exemption.

Mary Topliff, Esq. founded the Law Offices of Mary L. Topliff in San Francisco in 1997, after practicing civil and employment litigation for nine years. ( The firm specializes in employment law counseling, training, and compliance, focusing on practical solutions to avoid costly legal issues. She has advised many organizations regarding overtime exemption analyses and strategies for minimizing the risk. Topliff is a published author and frequent speaker on legal issues impacting the workplace.

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