HR Hotline: Can We Dock Exempt Employee Pay If PTO Is Exhausted?
Q: An exempt employee is planning to take time off leading up to a holiday, despite having already exhausted all of their accrued PTO.
They claim that, as an exempt employee, they are entitled to receive a salary even when absent. May we dock this employee’s pay, without impacting their exempt status?
A: Yes. While both state and federal law include strict limitations on when an employer may dock the pay of an exempt employee, you have described one of the exceptions to the general rule.
That general rule requires that exempt employees be paid on a “salary basis,” meaning they receive a predetermined amount for each pay period—regardless of the number of days or hours worked—which is not reduced due to variations in the quality or quantity of the work performed.
Thus, as your employee pointed out, an exempt worker will often be entitled to their regular paycheck, even when they work fewer than typical hours.
If an employer inappropriately docks such an employee’s pay, it risks losing that employee’s exempt status, thereby entitling the employee to overtime compensation.
However, there are limited circumstances in which an employer may dock an exempt employee’s pay without risking the worker’s exempt status.
Those circumstances are:
- When the employee performs no work during the work week
- During the initial and final weeks of employment, when an employer may pay a proportionate part of an employee’s salary for the time actually worked
- When an employee is absent for one or more full days for personal reasons other than sickness or accident
- When an employee is absent for one or more full sick days, provided the salary deduction is made in accordance with an employer policy or practice of making such deductions once sick days or disability leave has been exhausted, and where that policy has been disclosed to employees
- When an employee is absent for one or more full days due to a disciplinary suspension for violating a safety rule of major significance
- When an employee is absent for less than one full day for an FMLA-covered reason
It’s important to note that employers may not deduct any amount from an exempt employee’s salary for an absence attributable to either (a) lack of work; (b) jury or witness duty; or (c) temporary military leave, though the employer may offset any payments the employee receives from these sources.
This means that, should the employer choose to close for the day due to inclement weather, it may not take any deductions from exempt employees’ compensation.
For more information on wage and hour rules, including when an employer may deduct time from an employee’s PTO bank, and how these rules apply to inclement weather closures, register for CBIA’s HR Hotline Live: Winter Workplace Challenges, on Dec. 7, 2022 from 1-2 pm.
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