Exempt emp. / Incentive program

fah3

My wife works as a salaried/exempt employee for a major consulting firm. She recently received a letter in which her company informed her that in order to receive her full salary (that which was agreed to at her time of hire) she must be directly billable to customers at a monthly rate of 95%. If her "productivity" falls below 95% they will lower her salary by 10%. They are calling it an incentive pay program in which the incentive compensation is based soley on one metric, her direct billable time.

While they have not informed her that she has received a pay cut (in fact they deny that it is a pay cut), her base salary is now listed at a figure 10% below that which was agreed to in her original employment offer. The only way she can receive her original base salary is to be directly billable to customers 95% of the time. Is this legal?

My interpretation of the FLSA is that as a salaried/exempt employee, she shall receive her full salary, agreed upon at her time of hire, as long as she is ready, willing, and able to work irregarldless of whether or not her time is directly billable to customers.

Please help.

Theresa Gegen TX

The employer generally has a right to change the terms of employment for the future (for example, the employer cannot make a retroactive pay cut after the work is done). Here, it appears that it is a change to effect future work, which could be ok.

However, the employee has an employment contract (which an offer letter may or may not be, depending on the specific language and jurisdiction), the employer may be contractually bound. There may also be an issue with a promissory estoppel (enforceable promise).

The FLSA really won't come into play, unless the employee is being paid less than the minimum required amounts for the exempt status (which is a pretty low amount) or unless the employee is not really exempt. It sounds like the employee here is professional and most likely would be exempt.

With the tightening economy, I am hearing more about this type of stuff. The best recourse for the employee in many times (unfortunately) is to start looking for a job with a company that will appreciate her. Even if there is some type of promise or contractual right, the practical result of suing your employer can be an end to an effective career at that place (even if the employer does not retaliate and treats the employee fairly, oftentime co-workers can be wary of working with you, etc).


Good Luck!