Repaid Deduction Saves Day

By Andy Volin

The Fair Labor Standards Act requires employees to be paid on a salary basis, not hourly, to be exempt under the so-called white collar exemptions, e.g.  for executive or administrative employees.  A practice of improper salary deductions jeopardizes the exemption, according to the DOL regulations.  The Tenth Circuit recently explained how to analyze the regulations on this subject; a single improper deduction, promptly corrected, is not a practice of salary deductions. Ellis v. J.R.’s Country Stores, Inc., No. 13-1346 (10th Cir. Mar. 9, 2015). In this case, a manager of a gas station, who was treated as an exempt executive employee, quit because her paycheck had an improper deduction for a partial day that she worked.  The court rejected her suit because the company had a strong policy prohibiting improper deductions, the deduction only occurred one time, and the employer promptly reimbursed the manager for the deduction (and then some) after she brought it to their attention.  Check that you have a policy for reporting improper deductions.