Employers in Wisconsin may be closed this week due to the extremely cold temperatures that are predicted on Wednesday and Thursday. If an employer makes that decision, they may be wondering whether or not they need to pay their employees for the days they choose to be closed. For non-exempt employees, the answer is simple: employees must be paid only for time worked. Therefore, if the employer closes and the employee does not perform any work, the employee does not need to be paid. However, the answer is a bit more complicated for exempt employees.
Under the Fair Labor Standards Act (“FLSA”), an employee is considered exempt if they meet certain duties tests and receive compensation on a “salary basis.” The FLSA regulations provide that, for an exempt employee to be paid on a “salary basis,” the employee must receive his or her full salary for any week in which the employee performs any work without regard to the number of days or hours worked. An employee will not be considered to be paid on a “salary basis” for any week if deductions are made from an employee’s salary for any absence occasioned by the employer or by the operating requirements of the business. However, a deduction may be made when an exempt employee is absent from work for one or more full days for personal reasons, other than sickness or disability.
So, can an employer deduct the day’s wage from an exempt employee’s salary when the employer closes its business due to inclement weather (e.g., extreme cold)? The short answer is no. It is the U.S. Department of Labor’s (“DOL”) position that an employer must pay an exempt employee his or her full salary for any week in which work was performed if the employer closes its operations due to a weather-related emergency or other emergency, such as a power outage. The DOL’s position is based, in part, on the FLSA’s regulation that provides that deductions may not be made for time when work is not available. When it is the employer’s decision to close its business because of an emergency, including severe weather, the DOL presumes that employees remain ready, willing, and able to work. Under such circumstances, deductions may not be made from an exempt employee’s salary when work is not available. If deductions are made under such circumstances, the employer risks losing the exemption, thus subjecting it to potential overtime liability. If the employer’s operation are closed for a full workweek, no salary must be paid.
Employers are permitted to require that employees utilize their available paid time off during an employer-mandated office closure, whether for a full day or a partial day. However, if the employer does not provide paid time off or if the employee does not have available paid time off, the employer may not deduct from the employee’s salary for the closure. The employer may not require that the employee have a negative leave balance or make an already negative leave balance more negative as the result of requiring the employee to take paid time off for an office closure.
On the other hand, when an emergency causes an employee to choose not to report to work for the day, even though the employer remains open for business, the DOL treats such an absence as an absence for personal reasons. Consequently, an employer that remains open for business during inclement weather may lawfully deduct one full day’s wages from an exempt employee’s salary if that person does not report for work for the day due to adverse weather conditions or otherwise require the employee to utilize paid time off. Such a deduction will not violate the “salary basis” rule or otherwise affect the employee’s exempt status. If, however, the employee works only a partial day because of weather-related issues, the employer may not make deductions from the employee’s salary for the lost time because an exempt employee must receive a full day’s pay for the partial day worked in order for the employer to meet the “salary basis” rule.