FLSA regulations and the new ‘safe harbor’ provision
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FLSA regulations and the new ‘safe harbor’ provision

Employer protections under new FLSA compliance rules for payroll deductions.

If you have no safe-harbor policy for new FLSA regulations on overtime, consider setting one right now. Why? If you don’t have one you’re missing out on an employer-friendly aspect of the new FLSA regulations.

Under the new FLSA regulations, an employee loses exempt status if the employer has an actual practice of making improper deductions.

‘Significant likelihood’ dropped

Under the old FLSA compliance standards, the employee lost exempt status even if there was a significant likelihood of improper deductions. The new FLSA regs drop the “significant likelihood” standard and introduce a safe-harbor provision. But this important new protection is available only to employers with a written safe-harbor policy. While the DOL plans to publish a sample safe-harbor policy in the future, it recommends the following language for small businesses:

“The employer intends to pay its exempt employees on a salary basis and will not make any deductions from their salary that are prohibited under the Fair Labor Standards Act.”

The new safe-harbor rule, in addition to the clearly communicated policy, requires the employer to:

  • Make a good-faith commitment to FLSA compliance.
  • Include a complaint mechanism in its policies so salaried employees can complain about improper deductions.
  • Reimburse employees for any improper deductions.

Source: Nixon Peabody LLP.

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