Consultant’s Corner: Can You Dock Pay for Salaried Employees?
Q. Are there rules for docking they pay for salaried employees if they are absent from work?
Our answer assumes that you are referring to salaried employees that qualify for exempt status. There is a wide range of reasons and amount of time that an employee may be absent from work: vacation, personal time-off, illness, workers’ compensation injury, family medical leave, etc. Permitted paid time-off, short and long term disability benefits, and other employee absenteeism, supervisor approval requirements, and related compensation implications should be explained in written company personnel policies and handbooks.
However, in addition to input from your lawyer, you can review the following information regarding two common considerations for exempt employee time-off compensation:
Compensatory (comp) time
When exempt employees need to be away from work for short periods of time (usually hours not days), it is common to have a comp time policy or practice that allows employees to work extra time to make up the time off rather than impacting their vacation or other paid time-off benefits. As the Houston Chronicle’s Small Business section notes about Fair Labor Standards Act (FLSA) exempt employees and compensatory time:
“By definition of their exempt status, an exempt employee may work any number of hours in a single workweek and not receive overtime pay. Because of this, many employers don’t extend compensatory time to exempt workers when they work unusual amounts during a workweek — their job description is created to avoid overtime or compensatory time. Employers who provide compensatory time to exempt employees as a reward for extended hours don’t place employees’ exempt status at risk, as 29 C.F.R. §553.28 allows employers to provide exempt workers with additional benefits beyond FLSA-mandated salaries without altering their FLSA status.”
Further Reading:
Docking pay
From a general business perspective, docking (reducing) exempt employee pay for time off can jeopardize their exempt status and create overtime pay implications.
The FLSA generally does not allow you to dock pay from exempt employees. A salaried employee’s compensation is not dependent on how much time they work, or on the quantity or quality of their work.
But there are exceptions.
TrackSmart provides a list of situations in which salary deductions are permitted:
- “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.)”
If you accidentally make an improper deduction and then go back and correct it, you shouldn’t be in a panic about getting in trouble. But if you repeatedly violate the rules, then the FLSA can cost big time by transforming once-exempt employees into overtime-eligible non-exempt employees.
Further Reading:
- http://smallbusiness.findlaw.com/employment-law-and-human-resources/pay-docking-for-salaried-employees.html
- http://www.nolo.com/legal-encyclopedia/legal-limits-pay-docking-unpaid-suspensions-29992.html
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