64 | Massachusetts Wage & Hour Peculiarities, 2025 ed. © 2025 Seyfarth Shaw LLP subject to improper deductions.361 Employees in different job classifications or who work for different managers do not lose their status as exempt employees.362 Because violations of the salary basis test can have serious and widespread ramifications, employers should seek the advice of legal counsel before making deductions from an exempt employee’s salary, including attempts to recoup monies from the employee’s final paycheck (such as negative leave balances or tuition costs). While Massachusetts has adopted the FLSA’s salary basis requirements, violations of these requirements by a Massachusetts employer impose greater liability because of the Commonwealth’s mandatory treble damages law, described in detail in Section XIV.G. d. Safe Harbor for Employers That Make Impermissible Deductions Where an employer has a clearly communicated policy that prohibits improper pay deductions and includes a complaint mechanism, reimburses employees for any improper deductions and makes a good faith commitment to comply in the future, the employer will not lose the exemption for any employees unless the employer willfully violates the policy by continuing to make improper deductions after receiving employee complaints.363 Even in the absence of such a policy, improper deductions that are either isolated or inadvertent will not result in loss of the exemption for any employees subject to such improper deductions if the employer reimburses the employees for those improper deductions.364 The First Circuit has not interpreted these specific provisions of the federal regulations. In interpreting a related provision, though, the First Circuit found that an isolated e-mail referring to a possible scenario in which a salary guarantee would not be paid, absent any evidence of an actual practice that exempt employees’ pay was subject to improper deductions, was insufficient as a matter of law to cause the employer to lose the exemption.365 Conversely, courts generally have found that the safe harbor provision for isolated and inadvertent deductions does not apply where the employer had a policy of making improper deductions, or where the facts demonstrate that the employer did not intend to pay the employees at issue on a salary basis.366 Any employer that suspects that it has violated the salary basis test should contact legal counsel to discuss its exposure and potential remedial measure. 361 29 C.F.R. § 541.603(b). 362 Id. “[F]or example, if a manager at a company facility routinely docks the pay of engineers at that facility for partial-day personal absences, then all engineers at that facility whose pay could have been improperly docked by the manager” may be subject to the argument that they are misclassified; however, the exempt status of engineers “at other facilities or working for other managers []would remain exempt.” Id. 363 29 C.F.R. §541.603(d). 364 29 C.F.R. §541.603(c). 365 Litz v. Saint Consulting Grp. Inc., 772 F.3d 1, 4 (1st Cir. 2014). 366 See, e.g., Kennedy v. Commonwealth Edison Co., 410 F.3d 365, 372 (7th Cir. 2005) (“If the employees can show that the deductions were not merely happenstance, but a routine practice or company policy, the employer may not rely on the margin of error tolerated by the regulation.”); Takacs v. Hahn Auto. Corp., 246 F.3d 776, 783 (6th Cir. 2001) (“[T]he ‘window of correction’ regulation allows use of the defense only after an employer has first demonstrated an intention to pay its employees on a salary basis.”).
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