Q. In an effort to avoid laying off employees in this tough economy, our company has decided to temporarily reduce everyone’s work hours to 35 hours per week. May we?
A. Generally, yes. However, you should be aware of several things. First, the reduction in hours may only be done prospectively and should be communicated in writing.
Second, you are nearing certain thresholds under the North Carolina Employment Security Law. If an employee’s hours are reduced by 20% or more on a permanent basis, or if an employee’s wages are reduced by 15% or more on a permanent basis, the employee may voluntarily quit and still be eligible for unemployment benefits. If your reduction in hours is truly temporary, this should not be a problem for you.
Third, the salaries of employees exempt from federal and state overtime requirements may not be reduced on a temporary basis, without jeopardizing their exempt status.
Thus, you can reduce those employees’ salaries permanently as a cost-saving measure, but not because of a reduction in working hours.
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