For those of you familiar with the Department of Labor’s white collar exemptions, you are aware that one of the requirements for most of the exemptions is that you pay exempt employees a guaranteed weekly salary of at least $455 per week. However, many employers are not aware that there are strict limitations under what circumstances an exempt employee’s pay may be reduced.
Here are the ground rules regarding paying exempt employees:
1) They must be paid their full salary for any week in which they perform work (with limited exceptions).
2) Their pay may not be reduced because of quality or quantity of work or number of days or hours worked. (This means you can’t dock an exempt employee’s pay because they work 36 hours this week instead of 40.)
3) If an exempt employee works any part of a day, you must pay them for the entire day. (This includes using a smart phone to respond to emails or answering calls from co-workers about work-related issues.)
4) Unless you have a bona-fide sick leave policy that applies to your exempt employees, you cannot dock an exempt employee’s pay for being absent for a full day because they were ill.
5) You cannot make deductions from an employee’s salary because of the operating requirements of the business. So, if the employee is ready, willing and able to work, and you are closed for a holiday, you cannot dock their pay because the company did not provide work for them on that day. Similarly, you cannot reduce their pay because your company closes for a day or two due to inclement weather. (See the Department of Labor opinion letter at http://www.dol.gov/whd/opinion/FLSA/2005/2005_10_28_46_FLSA.pdf.)
6) You must pay exempt employees for time spent on witness or jury duty or on temporary military leave.
7) You cannot dock exempt employee’s pay for lost or broken equipment. (See Department of Labor opinion letter at http://www.dol.gov/whd/opinion/FLSA/2006/2006_03_10_07_FLSA.pdf)
8) You may not reduce an exempt employee’s pay in partial day increments. The only exception to this rule is if the individual is on a bona-fide, intermittent leave covered by the Family & Medical Leave Act.
So, we’ve covered the prohibited deductions from exempt employee’s pay. Now, let’s discuss under what circumstances you are permitted to reduce their pay.
You may deduct wages from an exempt employee’s pay under the following circumstances:
1) If an exempt employee performs no work (including no phone calls or emails) in the workweek, you do not have to pay them their salary.
2) You may prorate an exempt employee’s pay during their initial and final weeks of employment. So, if your workweek is Sunday through Saturday and the employee only works Wednesday, Thursday and Friday during their initial week of employment, you only need to pay them for those three days of work.
3) If you have a policy granting sick leave to exempt employees, you may reduce their pay in whole-day increments if they have either exhausted their sick leave allotment or have not yet earned sick leave.
4) You may dock an exempt employee’s pay when they are absent for a full day or more for personal reasons other than sickness or disability.
5) While you are not permitted to dock an exempt employee’s pay for witness or jury duty or temporary military leave, you may offset their salary with any fees received by the employee such as witness fees, jury fees or military pay.
6) Deductions may be made as penalties imposed in good faith for infractions of safety rules of major significance. According to the FLSA rules, “of major significance” includes rules “relating to the prevention of serious danger in the workplace or to other employees, such as rules prohibiting smoking in explosive plants, oil refineries and coal mines.”
7) An exempt employee’s pay may be reduced for unpaid disciplinary suspensions of one or more days for infractions of workplace conduct rules. “Such suspensions must be imposed pursuant to a written policy applicable to all employees.” It is highly recommended that you consult with your employment law attorney before taking such action to ensure the suspension and subsequent reduction I pay is compliant with the FLSA.
8) An exempt employee’s salary may be reduced when the employee is on an unpaid leave under the Family and Medical Leave Act.
To learn more about the Salary Basis Test under the Fair Labor Standards Act, please click to the fact sheet at http://www.dol.gov/whd/overtime/fs17g_salary.pdf.
Contributed by Christine Crews, SPHR, is Vice President of Human Resource Services for the Employers Association Forum, Inc. (EAF). EAF is a non-profit corporate membership-based association dedicated to serving the business and HR communities with world-class HR tools, hotlines & legal compliance, news & trends, surveys & economic data, benefits & insurance, risk management, training & consulting, and leadership & organizational development. HCCMO members receive discounted rates on all EAF classroom training at EAF’s training center in Longwood. Click here for currently scheduled programs: http://www.eafinc.org/online_store/training/HCCMO/training_programs.pdf.
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