If a salaried employee is late for work, can the employer dock that employee’s pay to account for the missed hours? In most cases, the answer is no. Most salaried employees are exempt under the Fair Labor Standards Act (“FLSA”), meaning that they are entitled to their full salary regardless of the quantity and quality of the work they perform. Employers who attempt to discipline their employees by docking their pay should be aware that FLSA sets forth rules for pay docking and imposes substantial penalties for violations of these rules. Employees should also know their rights under FLSA so they can report any impermissible pay docking.
Certain types of employment, including most salaried positions, are exempt under FLSA, meaning that they are not entitled to premium overtime, straight overtime, or compensatory time for working more than 40 hours in a work week. There are two tests to determine whether an employee is exempt. The first test, called the salary basis test, requires that the employee be paid a predetermined salary of at least $23,600 per year, regardless of the number of days or hours worked, or the quality or quantity of work performed.
The second test, called the duties test, defines four categories of jobs which may be considered exempt: executive, administrative, professional, and computer professional. Jobs in the executive category include supervisory or management positions. Professional jobs generally require advanced knowledge of a field and more than a high school education. Employees falling within the administrative category generally perform non-manual work directly related to management, such as executive assistance or advisory specialists. They usually have the authority and power to exercise their discretion to make independent judgments. Finally, computer professionals may be exempt under the professional exemption if they meet the “special duties” criteria and are paid either on a salary basis or on an hourly amount of at least $45.84 per hour.
There are multiple circumstances where employers are allowed to make deductions of an exempt employee’s salary:
On the other hand, FLSA prohibits the employer from docking the pay of an exempt employee because of the “quality or quantity” of the work. This means that an exempt employee must receive a full weekly salary when the employee has performed any work during the week. The number of hours or days worked is immaterial, and the employee is still entitled to full salary when work is unavailable but the employee is able, available, and ready to work.
An employer is subject to penalties if it is established that the employer did not intend to pay the employee on a salary basis. The court may consider several factors in making this determination, including the time period during which the improper deductions were made, the number of improper deductions, the number and location of both the employees subject to the improper deductions and the managers responsible, and whether the employer clearly explained its policy on permissible and impermissible deductions.
Employers who engage in impermissible pay docking may lose the overtime exemption for all other employees, working under the manager responsible for the violation and in the same job classification as the employee suffering the violation, during the time period in which the docking occurred. This means that the employer must pay normally exempt workers overtime wages if their hours exceed 40 hours in one work week. If the impermissible deduction was unintentional or was a one-time occurrence, the employer may not lose the exemption if it reimburses the employee for the deduction.
Before making deductions from a salaried employee’s paycheck, employers should be sure that they understand the FLSA rules for permissible and impermissible docking. Ongoing violations will result in significant expenses for employers because they will have to pay overtime to their normally exempt employees. Additionally, employees should be aware of the types of impermissible docking so they can report any violations and receive fair compensation.
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