Pay can be tied to work quality under FLSA wage and hour laws

by on March 27, 2009 · 1 Comment POSTED IN: HR Info Center

As long as the base pay stays the same, exempt employees’ salary can be adjusted

Here’s another thing you can do without canceling salaried exempt employees’ status: adjust their salary for the quality of their work – as long as you don’t take their pay below a predetermined base.

The recent case making this legal point came from Vermont. A mortgage lender paid a loan officer a base salary of $48,000 a year, and offered her extra compensation on a quarterly basis when she agreed to process additional loans above a certain number.

The employer wanted to make sure the extra loans weren’t “quick and dirty,” and so reserved the right to reduce the additional compensation depending on the quality of the extra work.

Eventually, the employee was terminated after 18 months on the job, and sued for unpaid overtime.


She claimed the salary-reduction plan amounted to the kind of salary adjustment that violates the wage and hour laws’ salary-basis test for exempt professional or administrative employees.

But the court disagreed. The pay plan guaranteed the employee’s base salary of $48,000, and no amount of errors in processing additional loans could bring her salary below that level.

Errors could affect only her additional compensation. This was legal under the FLSA wage and hour laws, and didn’t change her salaried status.

Cite: Havey v. Homebound Mortgage, No. 06-0978cv, 2nd Cir., 10/22/08

1 Comment on This Post

  1. April Loquiano
    June 29, 2011 - 2:47 am

    loan officer compensation

    yeah, it must not be “quick and dirty” for assurance of course. At least people who didn’t know this information yet will aware. Thanks

Leave a Reply


Request a Free Demo

We'd love to show you how this industry-leading training system can help you develop your team. Please fill out this quick form or give us a call at 877-792-2172 to schedule your one-on-one demo with a Rapid Learning Specialist.