Massachusetts Employment Law Blog

June’s “Tip of the Month” addressed the importance of paying an exempt employee on a salary basis in order to maintain the employee’s exemption from the overtime requirements of the federal Fair Labor Standards Act (“FLSA”). It also addressed the way in which making a deduction from an exempt employee’s regular paycheck risks the loss of the employee’s “salary basis” and exempt status. This month’s “Tip of the Month” examines what happens to an employee’s “salary basis” and exempt status when an employer adds to, instead of deducting from, an employee’s regular paycheck.

Unlike making a deduction, making an addition to an employee’s paycheck does not jeopardize the employee’s status as “paid on a salary basis.” Department of Labor regulations state that an employer can provide an exempt employee with additional compensation without losing the exemption or violating the salary basis requirement, so long as the employee’s pay includes a guarantee of at least a minimum weekly amount of $455 or greater.

Thus, an exempt employee who receives sales commissions on top of a base salary, or an exempt employee who receives additional “overtime” pay for time worked beyond his or her regular schedule, does not lose his or her “salary basis” status and as a result remains exempt from the overtime requirements of the FLSA.

For more information on this topic, please contact a member of the Employment Law Group.