Employers frequently are confused about what deductions are permissible under the Fair Labor Standards Act (FLSA) for exempt (most commonly interpreted as salaried) employees. Thus, they should have a policy containing FLSA Safe Harbor statements.
Although there are some exceptions, exempt employees are excluded from specific provisions of federal and state wage and hour laws. Exempt employees are paid on a salary basis that does not vary from week to week based upon the quality or quantity of work performed. In other words, exempt employees are paid “to get the job done.” Thus an exempt employee’s pay may not be reduced in any fashion for partial day absences, except when permitted by law, such as unpaid intermittent Family and Medical Leave (FMLA). Any deductions from an exempt employee’s salary must be in compliance with acceptable parameters for such deductions.
For example, the following types of deductions are permissible with regard to exempt employees’ pay:
- Full-day absences for personal reasons, other than sickness or disability;
- Full-day absences due to the employee’s own sickness or injury (including work-related injuries and FMLA-related absences). Such deductions will be made in accordance with a company’s paid time off plan(s) and state worker’s compensation laws and regulations;
- A penalty imposed for infraction of a safety rule of major significance;
- Full-day absences for unpaid disciplinary suspensions under a company’s disciplinary action policy for infractions of a company’s workplace conduct rules; and
- When no work is performed in a work week.
A company’s attendance and disciplinary action policies may be applicable to an absence even though the absence may not be one for which a deduction from salary would have been taken. In addition, the company should reserve the right to require an employee to utilize all paid time off benefits for full-day absences occasioned by a personal reason or the employee’s own illness or injury.
A company should also encourage its exempt employees who believe that his/her salary has been improperly reduced to report the problem to their Payroll Department immediately. The company should assure the employee that they are committed to comply, and expects all supervisors and managers to comply, with this policy and not to not make improper deductions from an employee’s salary. If deductions are improperly made, employees should be reimbursed immediately for such deductions.
For additional information on FLSA Safe Harbor statements, please contact New Focus HR or your company’s payroll provider.
Written By: Kristen Shingleton, M.B.A., CCP
President, New Focus HR LLC