Bonuses advanced and then rescinded: Does that threaten MFLSA exempt status? — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily
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Bonuses advanced and then rescinded: Does that threaten MFLSA exempt status?

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Q. Our small company is not subject to the federal Fair Labor Standards Act (FLSA), but is subject to the Minnesota Fair Labor Standards Act (MFLSA). We have several exempt employees. Our bonus plan states that employees eligible to receive bonus pay will receive bonus advances with each paycheck based on year-to-date performance results. Last year, we were on track to meet the maximum bonus throughout most of the year, but the last few months of the year were slow and we didn’t meet our target goal. As a result, we deducted certain amounts from the last few paychecks of salaried employees. Do these deductions threaten the exempt status of the salaried employees?

A. No, the MFLSA does not require that exempt employees receive the same amount in each paycheck. The MFLSA exempts from its application employees who perform certain types of duties and are paid a salary, which is defined by a Minnesota rule to mean that an employee “is guaranteed a predetermined wage for each workweek.”

The Minnesota Court of Appeals recently held that this provision does not require employers to pay the same amount in each paycheck as long as employees are guaranteed the same base salary for each workweek.

Thus, in your scenario, the fact that you took deductions from several of the later paychecks to recover unearned bonus advances does not preclude a finding that the employee was paid on a salary basis for purposes of the MFLSA.

This interpretation of the MFLSA may differ from the result that would apply under the FLSA for employers covered by that federal law. Rules adopted in connection with the FLSA provide that an employee is paid on a salary basis if that “employee regularly receives each pay period … a predetermined amount.”

In contrast, the MFLSA rule requires only that exempt employees be “guaranteed a predetermined wage for each workweek”—not that such an amount be actually received.

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