Continuing deductions slams correction window shut

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in Human Resources

Don't wait until someone questions his exempt status to check whether you've been making improper pay deductions and then try to correct the situation.

Although there's a "window of correction" for employers to make up for errors under the Fair Labor Standards Act, it's a limited offer. If you have a policy or practice of pay deductions, don't rely on making that correction to avoid losing the exempt designation and ponying up for past overtime.

Several federal appeals courts have upheld the Labor Department's position on that narrow window. Two examples:

Case 1. Hahn Automotive Corp. tried to bring its practices in line by rescinding its policy of unpaid disciplinary suspensions for managers and reimbursing those who had lost pay for infractions. But it was too late. Twenty-seven managers filed suit, and the court refused to let the employer use the window-of-correction defense. The former policy and the docking of managers' pay showed Hahn didn't intend to pay them on a salary basis, as required for the exemption. (Takacs v. Hahn Automotive Corp., No. 99-4431, 6th Cir., 2001)

Case 2. A company docked exempt employees for partial-day absences if they had exhausted their allotted benefit hours. The worker who filed suit admits that she never lost pay, but she claims the company's policy and practice subjected her to that possibility. Because the employer had made at least eight partial-day deductions to the pay of four supposedly exempt employees, it also was denied the window of correction. (Whetsel v. Network Property Services, No. 00-2798, 7th Cir., 2001)

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