5 FLSA Circumstances in Which Employers May Make Deductions from Exempt Employee’s Pay

Original Date: December 3, 2018

Exempt employees receive the same amount of predetermined compensation each pay period; weekly, biweekly, semi-monthly or monthly, depending on the payroll processing cycles within our organizations.  The predetermined amount cannot be reduced because of variations in the quality or quantity of the employee’s work.  Exempt employees do not need to be paid for any workweek in which they perform no work.  The exceptions/circumstances listed below are the only reasons an exempt employee does not receive full pay, regardless of the number of hours and days worked in the week.  Before implementing such practices, review state and local law to ensure all is legal.

Below are 5 circumstances for deductions in exempt employee’s pay:

  1. “Deductions from pay are permissible when an exempt employee: is absent from work for one or more full days for personal reasons other than sickness or disability; 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;
  2. to offset amounts employees, receive as jury or witness fees, or for military pay;
  3. for penalties imposed in good faith for infractions of safety rules of major significance; or for unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions.
  4. Also, an employer is not required to pay the full salary in the initial or terminal week of employment,
  5. or for weeks in which an exempt employee takes unpaid leave under the Family and Medical Leave Act.”[i]

The employer will lose the exemption if it has an “actual practice” of making improper deductions from salaried exempt level employees.  There are safe harbor provisions within the U.S. Department of Labor rule, which recommends having policies in place to ensure improper deductions are not taken and good faith efforts are made to address any improper deduction errors or mistakes.  Prior to deducting from an exempt employee’s pay, ensure you have reviewed state and local laws and regulations, as mentioned above.  These deductions should be made on a consistent basis throughout the organization.  I have rarely seen deductions from exempt employee’s pay except for FMLA days and terminal weeks of employment.

Additional Resources:

NY State Opinion Letter

NY State Deduction from Wages

Fact Sheet #17G: Salary Basis Requirement and the Part 541 Exemptions Under the Fair Labor Standards Act (FLSA)

– Matthew Burr, HR Consultant

[i] https://www.dol.gov/whd/overtime/fs17g_salary.pdf

 

 

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