What’s Allowed? Docking Pay From Salaried Employees for Being Absent
When it comes to the subject of docking pay for time off for salaried employees, you’ll find no shortage of articles addressing the topic. However, you’ve got to wonder – how much of what you read is true? We’ve got the facts on what is and isn’t allowed regarding docking pay for absences from salaried employees.
Defining Salaried Employees
Salaried employees get paid for the job they perform not the hours they work, and are typically exempt from the FLSA which includes overtime pay and minimum wage provisions.
“Job responsibility and the amount of direction the employee is under are both essential in identifying exempt employees,” says FingerCheck Payroll Compliance Director Merle Capello CPP. “Exempt employees typically have responsibility for other employees and work at the professional level, like supervisors, managers, and directors. They are not paid for a specific number of hours or a specific number of days in a period. It’s what they do. That’s the big difference.”
According to the current federal regulations that appear in Title 29 of the Code of Federal Regulations, Part 541, job titles alone are insufficient in establishing the exempt status of an employee – “the exempt or nonexempt status of any particular employee must be determined on the basis of whether the employee’s salary and duties meet the requirement of the regulations in this part.”
It’s Unusual to Dock Pay for Time Off
With the freedom and license to work as they see fit, “time” is not typically a requirement in the work an exempt employee puts in.
“An exempt employee understands that they need to put in the hours that are required to get their work done,” says Director Capello. “That’s the requirement – it’s not that they have to put in a certain number of hours in a week or month, but they need to be able to do their job. If they’re not doing it, it will become apparent sooner or later to the people that they work for.”
The emphasis on exempt employees is that they are expected to perform their job, and if they are doing their job, generally an employer should not be docking their salary for absences. However, though it is unusual to deduct absences, employers can deduct hours from employees’ PTO and under certain parameters, deduct pay from their salary.
When Employers Dock Hours, They’re Usually From Established PTO Benefits Plans
Salaried employees are typically included in a benefits plan that provides them with an allowance of paid time off. When they can, employers typically deduct non-work hours from employees’ PTO banks, instead of from their salary.
“For instance, if an exempt employee takes one week of vacation off and gets paid biweekly, instead of the employer paying 80 hours of salary, the employee will be paid 40 hours regular pay and 40 hours of vacation,” explains Director Capello. “The employee still gets the same pay but their year-to-date vacation time balance is being decremented.”
Salary Deductions Can Be Made
In the case that a salaried employee has not yet qualified under the plan policy or practice, or if the employee has exhausted their leave allowance or has no paid time off, deductions from salary may be made. However, salary deductions may only be made for full-day absences, a rule affirmed by the Wage and Hour Division:
“Deductions from salary may be made, however, when the employee is absent from work for one or more full days.” If an employee is absent for a full day, the absence can be made. “However, if an exempt employee is absent for one-and-a-half days for personal reasons, the employer can deduct only for the one full-day absence.”
Partial days cannot be deducted from an exempt employee’s salary. Regarding absences for sickness, the employer can make salary deductions only if they do not interfere with a documented sick leave plan.
In this article, we’ve read between the lines using a letter drafted by the Wage and Hour Division in response to a specific query regarding time off. Realistically however, once an employee runs out of banked time, there are very few instances where deducting from a salary is appropriate, cautions Alicia I. Dearn, lawyer and founder of Bellatrix PC.
“You will typically find it appropriate only in instances of an employee terminating midweek, the employee having a change in employment status (such as going out on leave, becoming inactive, or going part time). The purpose of salaries is to pay the same amount no matter how many hours an employee works. That cuts both ways. If an employee works fewer than 40 hours they get their full salary. If they work greater than 40 hours they do not get overtime.”
Employers Should Communicate Before Starting to Dock Pay
Employers should have a written contract specifying their PTO policy and at what point their salaried employees will begin to have their pay docked. It’s especially vital to communicate with employees before deducting pay.
“You really need to be able to put in writing, at what point exempt employees are going to be put on unpaid leave,” says Director Capello. “You can’t just dock their pay because that is a clear violation especially without a written plan.”
If an employer suspects an employee of abusing their exempt status to take frequent time off, a conversation needs to occur, says our Payroll Compliance Director. “If you see somebody slacking off, then you want to talk to them before it gets to that point, and say, ‘Okay you’re receiving a salary, and the understanding behind that is that you’re going to do that job. But I’m not seeing that job being done’. That’s what it ends up being, a performance conversation and a disciplinary conversation.”
The final verdict is that while docking pay from salaried employees for being absent from work is unusual, it is not illegal. However, there are complex circumstances that need to be taken into consideration before docking pay. For further clarification, please consult the current federal regulations which appear in Title 29 of the Code of Federal Regulations, Part 541, which we have already linked to several times in this article. Thanks to Cari A. Cohorn of Cohorn Law and Payroll Compliance Director Merle Capello for their contributions to this article.
*FingerCheck advises all organizations check their time rules with legal counsel in order to determine legitimacy, as this article does not endorse any particular setup.