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Salary Exempt and PTO issue Texas

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  • Salary Exempt and PTO issue Texas

    Here are the facts as I see them (some may have no bearing at all but I want to include as much information as possible):

    • I am a salaried employee expected to work 40 hours per week.
    • The "S" Corporation I work for is in Texas and has approximatly 52 employees.
    • I am a Professional Engineer licensed by the State of Texas and several others, have two advanced degrees, set my own schedule, prioritize my own tasks, etc. I don’t think there is any doubt I pass the test for the Professional Exemption. I also likely pass the Executive Exemption test (I have more than two employees working under me, have the right to hire and fire, etc.).
    • I am one of six shareholders in the company that I work for. I am a minority shareholder. There is no majority shareholder.
    • I commonly work more than 40 hours a week.
    • I get paid for every hour I work over 40 hours on a basis of my salary divided by 2080 hours. This is referred to as “premium time.”
    • The company provides me with a 216 hour Paid Time Off (PTO) pool each year.
    • If I do not use my PTO, at the end of the year the company pays me for my unused PTO on a basis of 0.5 times my salary divided by 2080 hours.
    • I also get a “production” bonus based on the profitability of my department.

    Due to my position and the type of work I do, my clients or employees sometimes cannot wait for me to get back from time off (vacation, sick days, etc.) so I frequently do an hour or more of work on these time off days. On my timesheet for my time off days, I put the number of hours I work and then add the rest of the eight hour day to PTO expecting it to be deleted from the pool of PTO given to me by the company. During payroll, the time I apply to PTO for these days gets changed to Overhead and there is no deduction in my PTO pool.

    Here is the meat of the question: Is this action during payroll required by law or is it just “a great benefit for my loyalty to the company”?

    As an owner, I feel this is important because the actions taken during payroll result in the company paying a larger amount during the PTO “buyout” at the end of the year. I realize this is a GREAT benefit for me but it may not be a good financial decision for the company. Even if it isn't required by law we likely wouldn't change the policy as long as we are profitable.

    A specific example: I recently took an extended business trip to Saipan in the CNMI. My daughter came with me and we extended the business trip with a vacation in Japan. While in Japan, pretty much every day I responded to employee and client emails and phone calls. A few days I actually did billable work. The amount of time I worked each day ranged from 15 minutes to 3 hours. Specifically on June 19, I did 1 hour of billable work and charged that hour to a job on my timesheet and then put 7 hours to PTO. During payroll, the 7 hours I put to PTO were changed to an overhead account code and my PTO pool was not reduced by 7 hours.

  • #2
    Neither the Federal government nor the state of Texas cares one whit what happens to your PTO, to put it bluntly. As long as you receive your full salary every week that you work, or are only pro-rated the appropriate percentage when permitted by law, both Federal and state law is satisfied. The Feds have gone on record stating that any PTO balances have nothing to do with them, and while some states care slightly about the use of PTO (unless we are talking about payout at termination, no state cares very much), Texas does not.
    The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.


    • #3
      Thank you for the prompt definitive response. We are being told this payroll action is required by Texas Law. I was skeptical.
      Last edited by drread; 09-15-2012, 05:43 PM.


      • #4
        Agreed. It sounds like someone in HR/payroll is confusing the fact/law that you can't deduct from pay for an exempt employee who works on any given day (even one hour) that they take off for personal reasons. But you can deduct that unworked time from a PTO bank even if it is not a full day. That deduction from PTO depends on company policy and right now, I agree that your company policy is very generous and if you had an unscrupulous employee, they could work it such that they took no timeoff and got a full payout of PTO at the end of each year.

        Plus I will say 216 hours per year in PTO is quite generous but I have seen that at higher exec levels and for long term employees. But a lot of company policies are "use it or lose it" with no payout. Again, payout is not a legal requirement in TX, but is dependent on company policy.


        • #5
          And just to be clear, the Exempt rule just mentioned does not apply to all Exempt employees, but just those subject to the Salaried Basis restrictions (29 CFR 541.602). There are something like 100 or so Exempt classification in FLSA and the Salaried Basis restrictions apply to only four of those classifications. Specifically Admistrative, Executive, IT Professional, and Professional. And those last two catagories are only sometimes subject to the Salaried Basis restrictions. For example, most farm workers are Exempt but not subject to the Salaried Basis restrictions. Saying someone is Exempt really does not mean much by itself. You also have to know exactly which Exempt classification is in play.
          "Reality is that which, when you stop believing in it, doesn't go away".
          Philip K. **** (1928-1982)


          • #6
            Good post/point, DAW.
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