To be exempt from the minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA), an employee must perform certain job duties and be paid on a “salary basis,” meaning that the employee receives a set salary each week, regardless of the number of days or hours worked, with limited exceptions. Under the FLSA, an employer may deduct from the pay of an exempt employee only under the following circumstances:
- No work: When an exempt employee performs no work for an entire work week, the employer is not required to pay the employee’s salary for that week.
- Personal reasons other than illness/disability: When an exempt employee is absent from work for one or more full days for personal reasons other than sickness or disability, the employer may deduct from the employee’s salary (only for full day absences, not partial day absences).
- Sickness/disability: When an employee is absent for one or more full days due to sickness or disability, the employer may deduct from the employee’s pay if the deduction is made in accordance with the employer’s plan, policy or practice of providing compensation for loss of salary due to sickness, health condition, or disability (e.g. paid sick leave, paid time off, short term disability, long term disability). Deductions for full day absences may be made before the employee qualifies under the plan and after the employee exhausts the leave allowed under the plan.
- Jury duty/witness duty/temporary military leave: When an exempt employee is absent from work due to jury duty, attendance as a witness at a trial, or temporary military leave, but performs some work for the employer during that week, the employer may offset the employee’s salary by the amount of compensation the employee receives in the form of jury fees, witness fees or military pay.
- Violation of safety rules: When an exempt employee violates safety rules of major significance (i.e. rules related to the prevention of serious danger in the workplace or to other employees), the employer may deduct from the employee’s salary in any amount.
- Disciplinary suspensions: When an exempt employee is suspended without pay for one or more full days for disciplinary violations involving workplace conduct rules pursuant to a written policy applicable to all employees (e.g. for violating an unlawful harassment policy or workplace violence policy), the employer may deduct from the employee’s pay.
- First/last week: When an exempt employee works only part of the employee’s first or last week of employment, the employer need only pay a proportionate part of the employee’s full salary for the time actually worked.
- FMLA: When an exempt employee takes unpaid leave under the Family and Medical Leave Act, the employer need only pay a proportionate part of the employee’s full salary for time actually worked.
Every employee handbook should address these deductions and establish a procedure for employees to report improper deductions from their pay.
Bean, Kinney & Korman, PC attorneys are available to assist with drafting such policies and advising clients regarding compliance with the FLSA and other employment laws.