FLSA2009-14 — Voluntary and mandatory time off policies and section 13(a)(1) salary basis

U.S. Department of Labor
Employment Standards Administration
Wage and Hour Division
Washington, D.C. 20210

FLSA2009-14

January 15, 2009

Dear Name*:

This is in response to your request for an opinion regarding whether your client’s
proposed staffing adjustment policy affects its employees’ exempt status under section
13(a)(1) of the Fair Labor Standards Act (FLSA).
1

Your client proposes occasionally reducing the hours worked by exempt employees due
to short-term business needs (e.g., low patient census). In such cases, the employer offers
“voluntary time off” (VTO), where employees may, at their option, use paid annual,
personal, or vacation leave, but continue to accrue employment benefits. The employer
approves VTO on a first-come, first-served basis. If there are insufficient volunteers for
VTO, the employer requires “mandatory time off” (MTO) under a seniority-based
rotational method. Exempt employees required to take MTO may use accrued paid leave
or take unpaid MTO. If the employee elects not to use accrued paid leave or does not
have sufficient accrued paid leave to cover the VTO or MTO, the employer deducts the
amount equal to the VTO or MTO from the employee’s salary, if it is shorter than one
workweek. For unpaid VTO or MTO lasting an entire workweek, the employer does not
pay the salary for that pay period. Salaried exempt employees may take VTO or be
assigned MTO in one-day increments.

Section 13(a)(1) of the FLSA exempts from minimum wage and overtime pay “any
employee employed in a bona fide executive, administrative, or professional capacity” as
defined in 29 C.F.R. Part 541. An employee qualifies for exemption if the duties and
salary tests are met. You ask that we assume the employees meet the duties test. We also
assume the employees in question receive at least $455 per week. See
29 C.F.R.
§ 541.600. Under 29 C.F.R. § 541.602(a),

[a]n employee will be considered to be paid on a “salary basis” . . . if the
employee regularly receives each pay period . . . a predetermined amount
constituting all or part of the employee’s compensation, which amount is not
subject to reduction because of variations in the quality or quantity of the work
performed. . . . An employee is not paid on a salary basis if deductions from the
employee’s predetermined compensation are made for absences occasioned by
the employer or by the operating requirements of the business. If the employee
is ready, willing and able to work, deductions may not be made for time when
work is not available.

1
Unless otherwise noted, any statutes, regulations, opinion letters, or other interpretive material cited in
this letter can be found at
www.wagehour.dol.gov.

2
It is our opinion that salary deductions due to a reduction of hours worked for short-term
business needs do not comply with § 541.602(a) because they result from “the operating
requirements of the business.” 29 C.F.R. § 541.602(a). Thus, “[i]f the employee is
ready, willing and able to work, deductions may not be made for time when work is not
available.” Id. Deductions from the fixed salary based on short-term business needs are
different from a reduction in salary corresponding to a reduction in hours in the normal
scheduled work week, which is permissible if it is a bona fide reduction not designed to
circumvent the salary basis requirement, and does not bring the salary below the
applicable minimum salary. See
Field Operations Handbook § 22b00; Wage and Hour
Opinion Letter
FLSA2004-5 (June 25, 2004) (“[R]ecurrent changes in the normal
scheduled workweek . . . more likely would appear to be designed to circumvent the
salary basis requirement.”).
2
Unlike a salary reduction that reflects a reduction in the
normal scheduled work week and is not designed to circumvent the salary basis
requirement, deductions from salary due to day-to-day or week-to-week determinations
of the operating requirements of the business are precisely the circumstances the salary
basis requirement is intended to preclude. Therefore, in this instance, salary deductions
due to MTO lasting less than a workweek violate the salary basis requirement and may
cause the loss of exempt status.
3
The employer is not, however, required to pay the
salary for MTO of a full workweek. See 29 C.F.R. § 541.602(a) (“Exempt employees
need not be paid for any workweek in which they perform no work.”).

Section 541.602(b)(1) states that “[d]eductions from pay may be made when an exempt
employee is absent from work for one or more full days for personal reasons.” Salary
deductions, therefore, may be made when exempt employees voluntarily take time off for
personal reasons, other than sickness or disability, for one or more full days. For
instance, an exempt employee paid $500 per week on a salary basis may take VTO for
personal reasons for four days in a workweek and receive one fifth of the salary. The
employee’s decision to take VTO, however, must be completely voluntary and not
“occasioned by the employer or by the operating requirements of the business.” 29
C.F.R. § 541.602(a)

This opinion is based exclusively on the facts and circumstances described in your
request and is given based on your representation, express or implied, that you have
provided a full and fair description of all the facts and circumstances that would be
pertinent to our consideration of the question presented. Existence of any other factual or
historical background not contained in your letter might require a conclusion different
from the one expressed herein. You have represented that this opinion is not sought by a
party to pending private litigation concerning the issues addressed herein. You have also

2
You ask generally whether, in cases where an exempt employee loses exempt status because of a payment
of a salary of less than $455 a week, the resumption of the payment of not less than $455 per week in the
succeeding weeks result in resumption of exempt status. Generally, “if an employer changes the duties or
reduces the wages so that an employee is not exempt during a given period, the loss of status would be
effective only after the change.” Wage and Hour Opinion Letter, 1998 WL 852696 (Feb. 23, 1998). “It is
possible to change the position back to an exempt status if the employee subsequently receives [the
required minimum] salary . . . However, the exemption may be lost if the changes in status occur so
frequently that one can conclude that the employee is not really paid [the required minimum salary].” Id.

3
For employees on MTO, the “employer[], without affecting [the] employees’ exempt status, may take
deductions from accrued leave accounts” provided employees receive their guaranteed salary. 69 Fed. Reg.
22,122, 22,178 (Apr. 23, 2004).

3
represented that this opinion is not sought in connection with an investigation or litigation
between a client or firm and the Wage and Hour Division or the Department of Labor.

We trust that this letter is responsive to your inquiry.

Sincerely,

Alexander J. Passantino
Acting Administrator

* Note: The actual name(s) was removed to preserve privacy in accordance with 5
U.S.C. § 552(b)(7).