A salaried, exempt manager occasionally needs to leave work early for personal reasons and the company deducts pay from his salary for those partial-day absences. What is the primary legal risk of this practice under federal wage and hour law?
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✓ Correct answer: C. Loss of the overtime exemptionUnder the Fair Labor Standards Act (FLSA), employees classified as exempt from overtime requirements must generally be paid on a 'salary basis,' meaning they receive a fixed salary that is not subject to reduction based on the quality or quantity of work performed. Deducting pay for partial-day absences violates the salary-basis test (except in limited circumstances, such as absences under FMLA or the employee's first and last week of employment). If an employer makes improper salary deductions, it risks losing the overtime exemption — potentially for all employees in the same job classification — which could expose the company to significant back-pay liability.
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