We all know that RNs and other “professionals” under the wage and hour laws must be paid on a “salary basis” in addition to performing the qualified professional duties in order to retain their exempt status. However, that raises an Issue.
The Issue? Does the fact that you pay exempt RNs or other employees an additional incentive pay (called “shift differential pay” in Department of Labor [DOL] lingo) for working evenings and nights or other more difficult shifts affect their “salary basis” of pay? And does this shift differential premium have to be paid on an entire shift basis or can the employees be paid on an hourly basis only for the additional hours worked during the extra shift value.
To refresh: 29 C.F.R. § 541.602 states that an employee is compensated on a salary basis “if the employee regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed.” However, as stated by the DOL in its Wage & Hour Op. Letter No. FLSA2005-20, the predetermined salary does not have to include all of the compensation that the employee will be paid.
Furthermore, 29 C.F.R. § 541.604(a) states that “the exemption is not lost if an [otherwise] exempt employee who is guaranteed at least $455 each week paid on a salary basis also receives additional compensation based on hours worked for work beyond the normal workweek. Such additional compensation may be paid on any basis (e.g., flat sum, bonus payment, straight-time hourly amount, time and one-half or any other basis), and may include paid time off.”
Therefore, exempt employees may be paid an overtime premium or shift differential pay that may be paid on an hourly basis without invalidating their otherwise-exempt status. So, use those additional incentives wisely without fear of modifying your employees’ exempt status.
