The Fair Labor Standards Act (“FLSA”), presents substantial exposure for employers. Although most employers are aware of the dangers of the FLSA’s overtime regulations, some of the other provisions of the FLSA are less known but equally risky. One such area is improper deductions taken from the weekly pay of exempt employees. Here is a quick run down of the basics you need to know. Remember, these rules govern exempt employees who are paid on a salary basis.
The general rule is that exempt employees must be paid for the entire week, regardless of whether they work the whole week. There are some exceptions to the rule.
1. Disciplinary suspensions can be tricky. A suspended employee need not be paid for the week if he did not work any time during that week. This exception does not work if the employee works even one day, or even a couple of hours, during the week. Further, the suspension must be made in good faith based on workplace conduct-rule infractions. If no written policy was violated, it is not advisable to deduct that time missed. But, if an employee is suspended or sent home as a penalty imposed in good faith for infractions of safety rules of major significance.
2. The employee need not be paid if he is absent from work for one or more full days for personal reasons other than sickness or disability. Deductions may be made for absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness. Remember, this exception applies only if the employee missed the full day of work.
3. Deductions may be made to offset amounts employees receive as jury or witness fees, or for military pay.
4. The employee need not be paid for the entire week during the first and terminal weeks of employment. So, if the employee’s first day of work is on a Wednesday, he can be paid on a pro rata basis for that week instead of the entire week’s salary. Same goes for the employee’s last week. If the employee quits without notice on Wednesday, you need not pay him for Thursday and Friday.
5. Finally, deductions may be made for weeks in which an exempt employee takes unpaid leave under the Family and Medical Leave Act.