Answer: Docking Pay From Salaried, Exempt Employees Is Illegal…And Very Common

The Fair Labor Standards Act (FLSA) is the law the controls the terms under which employees must be paid overtime. All employees fall into one of two categories “Exempt” or “Non-Exempt”. If an employee is non-exempt, when they reach more than 40 hours in a given work week, they have to be paid at time and a half for any additional hours. If they are non-exempt), they aren’t eligible for overtime. Most people think of non-exempt employees as “hourly” and exempt employees as “salaried”.

As a general rule exempt employees are paid a salary and don’t have to be paid overtime no matter how many hours they work. But there are other rules that come that exempt status. One important one that employers often ignore is the rule against docking pay.

Exempt employees who are late or who need to leave work early – for doctor’s appointment, child care, whatever – cannot have their pay docked for missing a couple of hours of work. If an exempt, salaried employee shows up for work, even if it’s just for 15 minutes, he or she must be paid for the entire day. That’s the rule.

The employer can discipline, fire, or demote the employee. But it cannot dock the employee’s pay.  Importantly, the employer is allowed to dock vacation time and force the employee to use that to cover the hours missed. But the employees pay may never be docked.

So what happens if the employer breaks this rule and docks pay? Well then the employer risks losing the FLSA “exemption” as to that employee. This means the employee may be owed overtime for all hours over 40 worked in the last two years plus all overtime worked in the future. This can add up to a substantial amount.

As with all employment rules, there are exceptions. Here are the situations in which an employer may legally dock an exempt employees salary:

1) When an employee is absent from work for one or more full days (NOT partial days) for personal reasons other than sickness or accident

2) When an employee is absent for one or more full days, if your business has an established benefit plan that covers salary for absences due to personal reasons, sickness or accident, and the employee has exhausted his or her available paid time  

Note with #1 and #2: Under a written paid time off (PTO) policy, an employer may deduct time from the bank for partial days missed (e.g., in hourly increments), but not if it results in a reduction of pay. Thus, if a salaried employee uses up all of his or her PTO time and then misses work, the employer may deduct only in full-day increments. If he or she misses a partial day, no deductions can be made.

3) For penalties imposed in good faith for violations of safety rules of major significance

4) To offset any amounts an employee receives as jury or witness fees, or for military pay. Beyond those offsets, however, deductions may not be made for absences caused by jury duty, attendance as a witness or temporary military leave.

5) For unpaid disciplinary suspensions of one or more full days imposed in good faith for violations of workplace conduct rules

6) Deductions for partial weeks worked during the initial or final weeks of employment. (For example, if an employee resigns in the middle of a workweek. It would be OK to pay him or her on a prorated basis only for the days worked in that week.)

7) When an employee works a reduced or intermittent work schedule under the Family and Medical Leave Act (FMLA). (It’s OK to convert a salaried employee to an hourly basis during this time without destroying the person’s exempt status.)

So, long story short is this: If you are paid by salary and your employer docks your pay for being late or missing a few hours of work here or there, you should contact an employment lawyer right away. Your employer is taking advantage of you and breaking the law. You may be owed a substantial amount of overtime pay.