Fair Labor Standards Act(Salary Deductions-Exempt Employees)

WHAT

The Fair Labor Standards Act (FLSA) requires that employees who are not determined to be in positions exempt from the Act must be paid at least the federal minimum wage for all hours worked and overtime pay at time and one-half for all hours worked over 40 hours in a workweek.

To be exempt from the FLSA overtime requirements employees must meet certain criteria, including that they are paid on a salary basis and deductions may be made only under certain circumstances.

This policy outlines the circumstances under which deductions from an exempt employee’s pay may be made, and provides a process by which employees may seek to correct an improper deduction.

Additional information related to Pay Administration is available in Employment Practice 4, Pay Administration.

WHO

All employees and personal service contractors with an employee/employer relationship whose positions are exempt from the overtime requirements of the FLSA.

WHY

To provide TVA employees and personal service contractors with an employee/employer relationship whose positions are exempt from the overtime requirements of the FLSA with a process to correct administrative errors in salary payments.

HOW

Section 13(a)(1) of the FLSA provides an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, and professional employees. Section 13(a)(1) and Section 13(a)(17) also exempt certain computer employees. To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week. Job titles do not determine exempt status. In order for an exemption to apply, an employee’s specific job duties and salary must meet the regulatory requirements of the Department of Labor.

Salary Basis Requirement

To qualify for exemption, employees generally must be paid at not less than $455 per week on a salary basis. Exempt computer employees may be paid at least $455 on a salary basis or on an hourly basis at a rate not less than $27.63 an hour. Being paid on a “salary basis” means that an employee regularly receives a predetermined amount of compensation each pay period and that this amount is not reduced because of variations in the quality or quantity of the employee’s work.

Circumstances in which TVA may make Deductions from Pay

Deductions from pay are permissible when an exempt employee:

is absent from work for one or more full days for personal reasons other than sickness or disability;
for absences of one or more full days due to sickness or disability if the deduction is made in accordance with TVA's leave policies;
receives jury or witness fees, or military pay;
is suspended for one or more full days imposed in good faith for workplace conduct rule infractions and in accordance with disciplinary policies.

TVA is also not required to pay the full salary in the initial or terminal week of employment; for penalties imposed in good faith for infractions of safety rules of major significance, for weeks in which an exempt employee takes unpaid leave under the Family and Medical Leave Act, or in other circumstances where permitted by the FLSA. In these circumstances, either partial day or full day deductions may be made.

Permissible voluntary payroll deductions authorized by employees include but are not limited to items such as:

Medical Insurance
Dental Insurance
Employee Life Insurance
Spouse and Dependent Life Insurance
Employee Accidental Death and Dismemberment Insurance
Spouse and Dependent Accidental Death and Dismemberment Insurance
Optional Long-Term Disability Insurance
Retirement Savings Plans
Long Term Care
401(K) Plan
Savings Allotments
Combined Federal Campaign
United States Savings Bonds
Union Dues
Van Pool
Flexible Spending Accounts
- Health Care Account
- Dependent Care Account

Policy

It is TVA’s policy to comply with the salary basis requirements of the FLSA for all employees in exempt positions. Therefore, TVA managers are prohibited from making any improper deductions from the salaries of employees in exempt positions. It is important that employees are aware of this policy and understand that TVA does not authorize deductions which violate the FLSA.

What To Do If An Improper Deduction Occurs

If an employee believes that an improper deduction has been made to his or her pay, he or she should immediately report this information to his or her direct supervisor, or Human Resource representative.

Reports of improper deductions will be promptly investigated. If it is determined that an improper deduction has occurred, the employee will be promptly reimbursed for any improper deduction made.

ROLES

Employees

Responsible for properly reporting their time and checking their Earnings and Deductions Statements for accuracy and reporting any improper deductions promptly to their supervisor or HR representive.

Human Resource Representatives

Assessing employees’ job duties to make determinations of exemption status under the FLSA.
Responding to employees and managers questions regarding FLSA requirements.

Managers

Responsible for properly approving employees’ time reports and any deductions from their pay.
Responsible for ensuring that employees’ job descriptions accurately reflect the duties being performed.

RESOURCES

Human Resource Service Managers/ Consultants
Employee Accounting Staff
Compensation Staff
Human Resources Information Services

EMPLOYMENT
PRACTICE 8

Fair Labor Standards

Last Revised 06/2005