Mass Layoff /Co. Restructuring- Salaried/Exempt EE's Workweek Reduced
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We are an engineering/manufacturing company in Florida and due to a major slow-down in business over approx. the last year, we've had to lay off about 20 people in May. It looks like we have to lay off about 30 people more in July, if business continues to drop. At that point, if we do have the layoff in July, we are down to half of our employees, about 50. Our company structure will also change, from an engineering/manufacturing facility, to an engineering/research & development facility. So every department will be affected at that point, especially shop areas.
Engineering and other admin areas will also be affected. All our engineers are salaried/exempt employees, and this is the question I have: Due to this lack of work, the management is looking at reducing some or all employees' workweeks, namely the salaried/exempt employees, possibly other salaried/exempt admin people. The reduction is only due to lack of work, and although they are making a good faith effort to get more business, it simply is not happening. If we have a reduction in hours for these employees, from 40 to 32 or even 24 hours, and the employees possibly even volunteer for this vs losing their jobs altogether, can we reduce their pay to the amount they are actually working per week without them losing their exemption status? I did do research and found conflicting answers. On the one hand, the DOL says under the Operating Req. that "deductions are not permitted under any circumstances for absences occasioned by the employer or by the operating req. of the business (e.g. plant shutdown)", and on the other hand under the DOL Field Operations Handbook it says that "...specifically permits reductions in employees' salary as a result of reductions in the normally scheduled workweek, without employees' exemption status being affected" as long as the salary remains above applicable min salary, and where the reduction is a bona fide reduction that is not designed to circumvent the salary basis requirement (which is our case here).
So can we do that without breaking any FLSA rules? And the second question I have is regarding benefits and this situation. If we do change our whole structure, making these salaried/exempt engineers/admin staff work these reduced work weeks "permanently", and we want to still offer them health benefits, profit sharing etc. even if they go below the number of hours worked, which our current policy for health says that employees must work more than 30 hours in order to qualify for health benefits. My question re the health benefits is if we can change that rule and reduce the number of hours required to qualify for eligibility in the health plan, or is there a "magic" required number under a federal law such as ERISA or OBRA? I tried to find an answer under those laws, but could not find specific info, so I figured that was probably an internal decision on our part, i.e. if we wanted to change our rules across the board re that topic, but I wasn't sure.
I would appreciate any information anyone could give me re this topic.
Engineering and other admin areas will also be affected. All our engineers are salaried/exempt employees, and this is the question I have: Due to this lack of work, the management is looking at reducing some or all employees' workweeks, namely the salaried/exempt employees, possibly other salaried/exempt admin people. The reduction is only due to lack of work, and although they are making a good faith effort to get more business, it simply is not happening. If we have a reduction in hours for these employees, from 40 to 32 or even 24 hours, and the employees possibly even volunteer for this vs losing their jobs altogether, can we reduce their pay to the amount they are actually working per week without them losing their exemption status? I did do research and found conflicting answers. On the one hand, the DOL says under the Operating Req. that "deductions are not permitted under any circumstances for absences occasioned by the employer or by the operating req. of the business (e.g. plant shutdown)", and on the other hand under the DOL Field Operations Handbook it says that "...specifically permits reductions in employees' salary as a result of reductions in the normally scheduled workweek, without employees' exemption status being affected" as long as the salary remains above applicable min salary, and where the reduction is a bona fide reduction that is not designed to circumvent the salary basis requirement (which is our case here).
So can we do that without breaking any FLSA rules? And the second question I have is regarding benefits and this situation. If we do change our whole structure, making these salaried/exempt engineers/admin staff work these reduced work weeks "permanently", and we want to still offer them health benefits, profit sharing etc. even if they go below the number of hours worked, which our current policy for health says that employees must work more than 30 hours in order to qualify for health benefits. My question re the health benefits is if we can change that rule and reduce the number of hours required to qualify for eligibility in the health plan, or is there a "magic" required number under a federal law such as ERISA or OBRA? I tried to find an answer under those laws, but could not find specific info, so I figured that was probably an internal decision on our part, i.e. if we wanted to change our rules across the board re that topic, but I wasn't sure.
I would appreciate any information anyone could give me re this topic.
Comments
If your employees are truly exempt, then what you really are going to ask them to do is take a cut in pay. If you are talking about the average work week declining from 40 to 32 or fewer hours you are talking about a 20%+ reduction in salaries across the board. The senior management/executives of the company are going to take the same cut, aren't they? If not, I would be prepared for a significant morale backlash from this action.