Understanding the pay-docking rules laid out by the Fair Labor Standards Act (FLSA) is easier said than done. They are often unclear and hard to comprehend. As a rule of thumb, FLSA doesn’t permit deductions from exempt employees. The regulations state that the amount of money a salaried employee earns cannot be dependent on the number of days or hours he or she works. You also cannot deduct money based on the quantity or quality of work the employee produces.
However, there are several exceptions. If your company accidentally make an improper deduction, you will be safe as long as it is an isolated incident and is corrected. But, if there are repeated violations, entire departments of exempt workers can suddenly transform into overtime-eligible ones by the magical powers of FLSA.
Permitted and prohibited deductions
Here’s a list of the situations in which you can dock exempt employees pay, courtesy ofTrackSmart:
- Exempt employees do not need to be paid for any workweek in which they perform no work.
- Exempt employees who are absent for a day or more for personal reasons other than sickness or accident. (Note that these deductions must be made only in full-day increments – not for partial-day absences.)
- Exempt employee absences of a day or more caused by sickness or disability, if the company maintains a plan that provides compensation for loss of salary caused by sickness and disability and the employee exhausted his or her “bank” of leave.
- Penalties imposed for violation of safety rules of major significance
- To offset any amounts received by an employee as jury or witness fees or military pay; however, beyond those offsets, deductions may not be made for absences caused by employee jury duty, attendance as a witness or temporary military leave.
- Unpaid disciplinary suspensions of one or more full days for breaking workplace conduct rules.
- Partial weeks worked during the initial or final weeks of employment. For example, if Joe resigns in the middle of a workweek, pay him only for the days actually worked in that week.
- In some cases, when a salaried/exempt employee has worked a reduced or intermittent work schedule under the Family and Medical Leave Act (FMLA). (You can convert a salaried employee to an hourly rate during the time he or she is on intermittent or reduced-workweek FMLA leave without destroying the person’s exempt status.
Red flags
On the flip side, the following deductions are FLSA red flags. These deductions can make a formerly exempt employee eligible to collect overtime:
- Business trips. You can’t deduct salary (or run the clock on paid time off benefits) for absences related to business trips, and
- Lack of work. If an exempt employee is ready, willing and able to work, you can’t deduct money for slow times when there’s little or no work assigned.
If your company is in need of assistance with exempt employee pay guidelines, contact Kellie Boysen with Alternative HR today at 717-855-5589.