Is it legal for my employer to state that due to declining customer demand they must reduce our pay by one day until further notice?

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Is it legal for my employer to state that due to declining customer demand they must reduce our pay by one day until further notice?

I work for an automotive supplier to Japanese car manufactures. Due to the earthquake ans tsunami, our sales have dropped off 50%+ for May, June, and possibly longer. My employer has sent us a letter stating that we must take a reduction in pay equal to 1 day but work our regular schedule. We are salary exempt and do not receive overtime. It’s my understanding according to the FSLA that exempt employees could not have their salary reduced for any reason other than discipline.

Asked on April 20, 2011 under Employment Labor Law, Indiana

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

Your understanding is not quite right. An exempt employee may not have his or her salary reduced for any *hours* not worked--i.e. if an employee is 2 hours late or leaves 2 hours early, they don't lose the equivalent of 2 hours pay. However, if you do not have a contract, you are an employee at will, and as an employee at will, your employer may reduce your salary at will without reducing your hours. So the employer could simply set your salary equal to 80% of its current amount (losing the equivalent of 1 day/week of pay) and may do so for any reason. It doesn't matter whether the employer equates that to being paid for 1 day/week less, or to being paid only 80% for all 5 days--the change is still allowed.

(Also: all that happens if an employer does dock exempt employees for any missed hours is that the exemption is lost and now they are eligible for overtime; the employer *may* still do this.)


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