In order for an employee to be exempt, he must receive a set salary (as well as performing the requisite duties) and that salary cannot be subject to improper deductions.  In a recent case, a warehouse manager asserted that improper deductions and the recording of her hours had destroyed her exempt status, entitling her to overtime.  The federal court rejected those assertions, as well as her contention that requiring her to comply with the company policies and procedures also undermined her exempt status.  The case is entitled Sander v Light Action, Incorporated and was filed in federal court in the District of Delaware.

The court granted the defendant’s summary judgment motion, finding that the employee was paid a guaranteed annual salary of $60,000 and she could also receive additional compensation (which is allowable under the FLSA regulations).  The court noted that the FLSA regulations posed “additional obstacles” to theory that the employee was not salaried.  The court asserted that 29 CFR 541.604(b) allowed an employer to compute exempt employee’s earnings “on an hourly, a daily or a shift basis, without losing the exemption or violating the salary basis requirement,” as long as: (1) the employee is paid a guaranteed minimum weekly amount for the salary basis test, regardless of hours worked, and, (2) a reasonable relationship exists between the guaranteed amount and the amount actually earned.”  That provision also allowed additional compensation to be paid, as long as the minimum salary was paid.

Thus, the court concluded that the employee was salaried.  The judge ruled that “there is simply no basis in the record to make any finding other than that Plaintiff was paid a guaranteed base of $60,000 annually.”  Therefore, there was no basis to conclude that the employee was not salaried.

The employee also contended that her exemption was undermined because her employer tracked her work hours.  The court rightly rejected this contention, concluding that it is the nature of an employee’s job duties that governs the exemption analysis, not an administrative, ministerial tracking of hours.  The court also rejected the assertion that allegedly improper, partial day deductions, made in nine weeks (out of a total of 156) undermined her exemption,  The employer was able to explain “in careful detail” how the employee’s contentions were factually wrong and did not evidence allegedly illegal deductions.

Two lessons emerge for employers: 1) Simply keeping “time records” for exempt employees does nothing (good or bad) for the exemption analysis; the duties and salary basis test control; and, 2) Partial day deductions must be avoided at all costs; if the employee herein had shown such improper deductions, those actions might have undermined not only her exempt status, but the exempt status of all employees classified as exempt.