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eTrends - DOL Opinion Letter Approves Mandatory Vacation During Shutdown

03.26.2009

The U.S. Department of Labor’s Wage and Hour Division (“DOL”) recently released an Opinion Letter (which was issued at Smith Anderson’s request) clarifying that employers may require exempt employees to use their accrued vacation time during a company shutdown of less than one workweek without violating the salary basis requirement and jeopardizing the employees’ exempt status under the Fair Labor Standards Act (“FLSA”).  Wage and Hour Opinion Letter FLSA2009-2 (Jan. 14, 2009). 

After reviewing several seemingly inconsistent positions in prior DOL opinion letters, Smith Anderson requested the DOL’s opinion as to whether an employer could implement a policy that would require exempt employees to use any accrued vacation or paid time off during a temporary shutdown of less than one full workweek without violating the salary basis requirement.  Generally, an employee must be paid on a salary basis to be considered exempt from the overtime and minimum wage requirements of the FLSA.  The exempt employee must regularly receive a predetermined amount of compensation (generally at least $455 per week) each pay period, and that amount cannot be reduced for any week in which the employee performs any work, regardless of the number of days or hours worked, unless certain exceptions apply.

Quoting the most recent of its opinion letters on the issue, the DOL noted that its position is that “[s]ince employers are not required under the FLSA to provide any vacation time to employees, there is no prohibition on an employer giving vacation time and later requiring that such vacation time be taken on a specific day(s).”  Further, the DOL noted that “a private employer may direct exempt staff to take vacation or debit their leave bank account . . . , whether for a full or partial day’s absence, provided the employees receive in payment an amount equal to their guaranteed salary.”  Wage and Hour Opinion Letter FLSA2005-41 (Oct. 24, 2005).

Accordingly, the DOL is of the opinion that an employer may require exempt employees to use accrued vacation time for any absence, including one resulting from a plant shutdown of less than one week, without affecting their exempt status, as long as the affected employees receive payment that equals their guaranteed salaries.  This opinion does not apply to shutdowns lasting a full workweek, since exempt employees need not be paid for any workweek in which they perform no work.  The opinion also does not apply to employees who have no accrued vacation or paid time off.  Indeed, the DOL emphasized that if an exempt employee has no accrued vacation time remaining, or has a negative vacation leave balance, the employee still must receive the employee’s guaranteed salary during the temporary shutdown in order to avoid violating the salary basis requirement and jeopardizing the employee’s exempt status.

A copy of Wage and Hour Opinion Letter FLSA2009-2 is available on the DOL website; (PDF version)

For more information, please contact Susan Milner Parrott or Catherine E. Kimberley

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Smith Anderson publishes eTrends periodically as a service to clients and friends. The purpose of this eTrends is to provide general information about a significant legal development in the field of employment law. Readers should be aware that the facts may vary from one situation to another, so the conclusions stated herein may not be applicable to the reader’s particular circumstances.

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