Posted on 05-May-09 by The Timekeeper

Yesterday, I mentioned an upcoming audio presentation designed to help employers navigate the pitfalls of furloughs and other labor-cost-cutting measures they might be considering, given the current state of the economy.

Today, I came across two articles that illustrate just why wage and hour implications are (or at least should be) such a concern to employers contemplating these sorts of things. Do it wrong, and you face substantial risks.

Basically, if you’re talking about a furlough or a temporary shutdown or reduced hours for non-exempt and hourly workers (that is, those who are overtime-eligible, so you’re already tracking their hours and their pay depends at least in part on how many hours they work)… well, you’re most likely in the clear. Although it would still be an excellent idea to check with your lawyer just to make sure.

But when you start trying to save money by cutting hours, cutting pay or instituting a furlough for salaried exempt workers, that’s when you enter tricky legal ground. Not to say that it can’t be done — just that it requires some careful planning an execution, not just in what you do and when and how you do it, but even in the words you use to describe it.

The consequences? You could risk the “exempt” classification of not only the employees covered by the furlough, pay cut or reduced hours… but of every other exempt employee in that classification (which, depending on how your payroll is set up, could very well be every other exempt employee you’ve got).

No point in trying to save a few bucks on payroll, only to have to turn around and pay even more in fines and penalties because the cost-reduction measure you chose was illegal… not to mention having all your formerly non-overtime-eligible salaried exempt employees reclassified to non-exempt or even hourly. (Either way, you’d have to start tracking their hours and potentially paying overtime.)

Can you afford that? I didn’t think so.

Take-away lesson: before you do anything to mess with your salaried exempt employees’ work schedule or pay rate, check with your friendly neighborhood employment law attorney to make sure what you want to do is acceptable under the laws applicable to your jurisdiction. Remember, you’ve got to satisfy both the state and the feds, and their rules might be different. Don’t mess around with this… it might be your business’s very survival at stake.

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