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The Washington Department of Labor and Industries has recently answered the above question and other elusive questions regarding a salaried employee's "exempt status" under state law. The general overtime rule is that employers are required to pay their employees one and one-half times their regular hourly rate for time worked beyond forty hours per week. Certain employees are "exempt" from the overtime requirements under both state and federal law. These employees are generally those holding executive, administrative, or professional positions. Generally, these types of employees are exempt if they perform certain duties and are paid on a "salary basis."

However, what constitutes a "salary basis" under Washington law has not been clear or easy to apply. In contrast, federal law is clear: under federal law, an employee is paid on a "salary basis" if that employee regularly receives a predetermined amount that is not subject to deductions for quality or quantity of work.

Fortunately, the new state regulations clarify this issue and are now similar to federal law. Now it is clear that an employee is paid on a salary basis where that employee regularly receives a predetermined monetary amount, which cannot be less than Washington's minimum wage and cannot be subject to deductions due to the quality or quantity of the work performed by the employee. The new regulations also provide specific guidance on when it is permissible to deduct amounts from an exempt employee's salary:

1. If an employee performs no work in a particular week, the employer may deduct for the entire week.
2. If an employee takes at least a day off for personal reasons, other than sickness or accident, the employer may deduct in full-day increments.
3. If an employee takes leave due to sickness or disability, the employer may deduct in full-day increments if made in accordance with the employer's sick and disability leave plan. Where the employer has a sick or disability leave plan, deductions are permitted only if the employee is not yet qualified under the plan or has exhausted all benefits under the plan.
4. Where an employee is eligible for leave under the state or federal Family and Medical Leave Act, the employer may deduct for partial-day absences.
5. In the first and final week of employment, the employer may prorate the employee's salary for the actual days worked.
6. Where an employee is subject to a disciplinary suspension for a violation of a major safety rule, the employer may deduct for the disciplinary absence.
7. Deductions may be made from compensatory time in any increment.
8. Partial-day deductions may be made from bona fide leave banks, but only where the employee has made a request for time off. Leave bank deductions may not be for less than one hour.
9. Public employees may be subject to partial-day deductions in specific situations.

The following deductions are not permissible, and if made, may make the employer liable for overtime pay:

1. Deductions are not permitted off partial days of work, except as stated above for family or medical leave.
2. Deductions are not permitted for lack of work for any amount of time less than a full week.
3. Deductions are not permitted if the employee is absent due to jury duty, attendance as a witness, or temporary military leave where the employee performs any work during the week. The employer may, however, offset any amount the employee received as jury or witness fees or military pay.

Where the employer accidentally makes an improper deduction, the new regulations provide for a "window of correction." Where an infrequent and inadvertent mistake is made, the employee's exempt status will not be destroyed if the employer takes immediate corrective steps and the deduction was not made due to lack of work and was not part of a pattern of similar improper deductions.