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Deductions endanger exempt status

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in Human Resources

A group of New York City employees was designated as salaried and exempt from overtime, but several regulations subjected city workers to pay deductions and suspension for absences. None of these policies applied specifically to the managers, nor did the city require the deductions in particular circumstances.

When the workers sued for unpaid overtime, the issues included whether there was an actual practice of deductions or any policy that made them likely.

The answer involves more than dividing the number of deductions from exempt employees by the number of those employees, so a federal appeals court sent the case back to a lower court for more detailed analysis. (Yourman v. Giuliani, No. 99-9310, 2nd Cir., 2000)

Advice: To be exempt, an employee must perform certain duties and must be paid on a "salaried basis" as defined by the U.S. Labor Department. There are only a few limited deductions that may be made, and they do not include many disciplinary infractions or absences of less than a day.

While you generally won't be penalized for occasional, inadvertent errors, take care if you ever decide to make a deduction from an exempt employee's salary.

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