Docking Pay for Exempt Employees: When is it Okay?

Certain Deductions for Exempt Employees are Permitted Under Federal Labor Law

When it comes to understanding pay-docking rules outlined in the Fair Labor Standards Act (FLSA), things can get pretty complicated. Does federal labor law permit docking pay for your exempt employees? If so, when is it allowed? And when is it prohibited?

What is an Exempt Employee?

First and foremost, it’s important that you understand if your employees are exempt or non-exempt to further understand the pay-docking rules outlined by the FLSA. Misclassification of employees is one of the most common violations under the FLSA₁. The definition of an exempt employee can get fairly complex, but an exempt employee generally meets three tests₂:

1. They are paid above $455 per week.
2. They receive a salary rather than an hourly wage.
3. They perform a job in an exempt category listed by the U.S. Department of Labor, such as supervisor, manager, professional services and certain administrative jobs.

When Is It Okay to Dock Pay from Exempt Employees?

As a general rule, the FLSA does not allow deductions from exempt employees’ pay. For instance, you cannot dock pay from a salaried employee based on the number of days or hours he or she works or on the quality or quantity of work the employee produces₃.

However, there are exceptions to this rule. There are situations where docking an exempt employee’s pay is permissible.

Permissible Deductions for Exempt Employees

Under the FLSA, it is okay to dock pay from exempt employees under these circumstances:

1. An exempt employee has performed no work that week.
2. An employee is absent for a day or more for personal reasons (besides sickness or accident).
3. An exempt employee violates safety rules of major significance or is under disciplinary suspensions of one or more full days for breaking workplace conduct rules.
4. To offset any amounts received by an employee as jury, witness fees or military pay. Note: beyond those offsets, deductions may not be made for absences caused by employee jury duty, attendance as a witness or temporary military leave.
5. An employee resigns half-way through the work week.

Resources

1. https://www.thebalancecareers.com/docking-exempt-employee-pay-legally-4148393
2. http://smallbusiness.chron.com/definition-full-time-exempt-employee-17506.html
3. http://www.cfodailynews.com/docking-pay-for-exempt-employees-whats-allowed/