Be Careful When Deducting from a Salaried Employee’s Pay

Must an employer pay a salaried, exempt employee for the full day, even if they only work for an hour?

The short answer is yes – most of the time – but not always.

The Fair Labor Standards Act (FLSA), establishes the federal minimum wage, overtime laws, recordkeeping standards, child labor laws, and more. It is under this labor law that employee’s position must be classified as exempt or non-exempt, based on job duties, not title. Assuming a company has classified every position correctly, the FLSA then further contains a section outlining situations in which an employer is permitted to make pay deductions from an exempt employee’s salary.

In short, according to the FLSA, unless state law requires otherwise, salary CAN be reduced for the following reasons:

· Full-day absences for personal reasons;

· Full-day absences for sickness or disability; (in accordance with a bona fide sick leave policy)

· Full-day disciplinary suspensions for infractions of written policies and procedures;

· Family and Medical Leave (FMLA) absences (either full- or partial-day absences);

· To offset amounts received as payment from the court for jury and witness fees or from the military as military pay;

· The first or last week of employment in the event the employee works less than a full week; and

· Any full work week in which the employee does not perform any work.

An example situation is when an employee reports to work at the start of the day but leaves to return home because of illness after only a couple of hours. If the company has a PTO or sick leave policy in place, the employer may require the employee to use any available leave under the applicable policy for the reminder of the day. If the employee has exhausted all available leave, then the employer must pay the employee for the entire day.

Before deducting pay from exempt employees, note that the FLSA may not be the only wage and hour law which applies. States, counties and municipalities often have enacted separate wage and hour laws. It is the responsibility of the employer to follow the law that is most beneficial to the employee. If an improper pay deduction has been made, correct it as soon as possible.

The full fact sheet from the Department of Labor website can be found here.