Docking an exempt or salaried employee’s pay is only allowed in certain circumstances.
Generally, the Fair Labor Standards Act (FLSA) does not permit deductions from exempt employees. According to the regulations, the amount of money a salaried employee earns isn’t dependent on the number of days or hours he or she works. You also can’t deduct money based on the quantity or quality of work the employee produces.
However, there are some exceptions to the rule:
- Exempt employees do not need to be paid for any workweek in which they perform no work.
- Deductions may be made for exempt employees who are absent for a day or more for personal reasons other than sickness or accident. (Deductions must be made in full-day increments, not for partial-day absences.)
- Deductions may be made for exempt employee absences of one day or more caused by sickness or disability, if the company maintains a plan that compensates for loss of salary caused by sickness and disability and the employee has exhausted his or her “bank” of leave.
- Deductions may be made for penalties imposed for safety rules violation of major significance
- Amounts received by an employee for jury or witness fees or military pay may be offset. Beyond those offsets, deductions may not be made for absences caused by employee jury duty, attendance as a witness or temporary military leave.
- Deductions may be made for unpaid disciplinary suspensions of one or more full days for breaking workplace conduct rules.
- Payment may be adjusted for 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),pay may be adjusted. (You can convert a salaried employee to an hourly rate during the time he or she is on intermittent or a reduced workweek FMLA leave without destroying the person’s exempt status.
If your company inadvertently makes an improper deduction, it must be corrected immediately to avoid penalties. If an employer is found to be “intentionally” engaging in improper pay docking, they will lose the overtime exemption for the pay period the docking occurred for other employees working in the same job classification for the same manager responsible for the deduction.
This means that the employer must pay normally exempt workers overtime wages if their hours exceed 40 hours for one work week.
If you are not sure when to dock a salaried employee’s pay or have questions regarding pay practices, please contact your BCN Services specialist for guidance.
List of permitted deduction courtesy of TrackSmart
Lisandra Garrow, Partnership Manager