FLSA and Safe Harbor
A federal law known as the Fair Labor Standards Act (FLSA) governs the minimum wage workers must be paid and overtime requirements, including classes of employees that are exempt from overtime pay. Although the law requires full employer compliance, it also includes a provision that helps mitigate the consequences of an inadvertent violation regarding to improper salary deductions.
Ordinarily, companies that make a mistake in the deductions of one overtime exempt employee, causing non-compliance with FLSA, are subject to losing the overtime exemption for the entire class of workers to which that employee belongs, a penalty that could make just one mistake very costly. The so called Safe Harbor provision in 29 CFR 541.603 serves to mitigate such a mistake by establishing a policy that meets the following basic administrative requirements.
Generally speaking, an employer may lose overtime exemptions if it makes improper deductions that include (but are not limited to) not make deductions for absence, deductions for policy violations, deductions for causing damage to company property, or deductions for tardiness. The improper handling of these situations can result in a violation of FLSA. In effort to ensure compliance with FSLA, a business owner or manager should obtain legal advice from an attorney or other legal professional familiar with employment law.
Image Credit: Wikimedia Commons/Lalala666