58 | Massachusetts Wage & Hour Peculiarities, 2025 ed. © 2025 Seyfarth Shaw LLP salary in the initial and final weeks of employment; the employer may pay a proportionate part of the full salary for the time actually worked.318 a. Compensation Paid in Addition to Salary An employer may pay an employee additional compensation, over and above the guaranteed weekly salary, without losing the exemption if the employment arrangement also includes a guarantee of the minimum weekly required amount on a salary basis.319 In addition, federal regulations provide that an exempt employee’s earnings “may be computed on an hourly, a daily, or a shift basis,” without compromising the exemption, so long as the employee receives a guaranteed minimum weekly salary that meets the salary basis test requirements and there is “a reasonable relationship exists between the guaranteed amount and the amount actually earned.”320 Employers who elect to calculate earnings for exempt employees on an hourly, daily or shift basis and pay additional compensation beyond the guaranteed weekly salary should consult legal counsel before implementing this pay plan, to confirm that the plan is designed to meet the requirements of the reasonable relationship test. b. Deductions from Salary If an employer makes improper deductions from an employee’s predetermined salary, the employee is not considered to have been paid on a salary basis and is therefore no longer exempt.321 Moreover, where an employer has an “actual practice” of making improper deductions from employees’ pay, the exemption may be lost as to all employees in the job classification to which the practice applies and who work for the manager responsible for the improper deductions.322 For example, if a manager at a particular company facility routinely docks the pay of engineers who otherwise meet the requirements of an exemption for partial-day absences, the exemption for all engineers at that facility whose pay could have been improperly docked would be lost for the time period during which the improper deductions were made. Engineers at other facilities or those who worked for other managers would not be affected and thus would remain exempt.323 318 29 C.F.R. § 541.602(b)(6). 319 29 C.F.R. § 541.604(a); Guardia v. Clinical Support Options, Inc., 25 F. Supp. 3d 152 (D. Mass. 2014) (addressing same issue under prior salary threshold). 320 29 C.F.R. § 541.604(b). What constitutes a “reasonable relationship” is case specific. However, according to a 2018 DOL Opinion Letter, “a 1.5-to-1 ratio of actual earnings to guaranteed weekly salary is a ‘reasonable relationship’ under the regulations,” but “usual earnings that are nearly 1.8-times – close to double – the guaranteed weekly salary materially exceed the permissible rations found in the regulations and are not roughly equivalent to that salary under § 541.604(b).” DOL Wage & Hour Opinion Letter FLSA2018-25 (Nov. 8, 2018). 321 29 C.F.R. § 541.603(a). 322 Id. 323 29 C.F.R. § 541.603(b).
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