Allowable Deductions for Exempt Employees
Scenario:
My employer wanted to deduct money from my paycheck because I had to leave work a little early last Friday, meaning I didn’t quite get to 40 hours. However, I’m an exempt employee, so I get paid on a salary basis. Are they allowed to deduct that from my paycheck? What are allowable deduction for exempt employees?
Answer:
Readers of the newsletter might recall we have discussed exemptions from overtime previously. You can find the information HERE. For a quick recap,
an exempt employee under the Fair Labor Standards Act (FLSA) does not have to be paid overtime. It doesn’t matter how much they work, they get paid the same rate regardless. An exempt employee gets paid if they did work that workweek, regardless of how many hours they actually worked. 35 hours, 47 hours, it generally doesn’t matter about the actual time spent working.
However, that isn’t to say an exempt employee can simply not work for a day.
If an employee is absent from work for one or more full days, as long as it is for personal reasons other than sickness or disability, and assuming they are not utilizing some sort of paid time off, an employer then is allowed to deduct from an employee’s paycheck. Deductions can also be made for a partial-week’s work, but only when it is that employee’s first or last week of employment.
For absences due to sickness or disability, a deduction is allowed if it’s made in accordance with a bona fide plan, policy, or practice of providing compensation for salary lost due to illness, such as a paid sick leave plan. Deductions can also be made when offsetting other compensation employees receive, such as jury, witness, or temporary military duty leave.
If an employee violates safety rules of major significance, an employer can impose penalties, as long as said penalties are made in good faith. Deductions are also allowed if an employee utilizes unpaid leave under the Family and Medical Leave Act (FMLA).
It may seem like what can and cannot be deducted is a seemingly endless list of rules and exceptions. As a general rule of thumb, partial day absences are not allowable deductions for exempt employees. If an employee misses two days, and part of a third, they can only be deducted for the two full days missed. In addition, absences due to the employer, such as being closed for inclement weather, do not allow employers to deduct that absence from the exempt employee.
All of this information is based on the Fair Labor Standards Act. For more information as well as more examples, the Department of Labor has published a great resource that can be found here.
Some states may have more requirements on what is and isn’t considered an allowable deduction, and it may apply to both exempt and non-exempt employees.
Employers may want to check with an employment lawyer for more information, or if they are a Vida HR client, consult their HR Business Partner.