The federal Fair Labor Standards Act (FLSA) requires exempt employees to be paid a fixed weekly salary that cannot be reduced based on the quality or quantity of the employee's work. When an employer wishes to make a pay deduction for an employee absence or due to a safety violation, it must ensure that the deduction is allowable under the FLSA. If improper deductions are taken, the exempt status of that employee and others in the same class may be lost and overtime and penalties may be due.
While deductions from pay for items that benefit the employee are allowed (such as health insurance premiums and pension plan contributions), docking pay for absences or safety violations is strictly limited. The FLSA regulations at 29 CFR 541.602 govern when deductions may be made, and the Department of Labor offers guidance in its FLSA E-Law Advisor. State wage deduction laws may further limit pay reductions, so employers will need to check those for additional compliance obligations.
While an employer never has to pay an exempt employee when he or she performs no work in a workweek (regardless of the reason), shorter absences may not allow for pay deductions. The quick-reference chart below provides guidance on allowable and nonallowable salary deductions for exempt employees under the FLSA.
Safe harbor rules
An employer may rectify improper pay deductions without penalty by following the safe harbor rules at 29 CFR 541.603. Employers may protect themselves under the safe harbor provision by:
- Establishing a clearly communicated policy prohibiting improper deductions and including a complaint mechanism.
- Reimbursing employees for any improper deductions in a reasonable time frame.
- Making a good-faith commitment to comply in the future.
Exempt Pay Deductions
| Absence Type |
Pay Deduction
|
|---|---|
| During first or last week of employment When an employee works less than a full week in the first or last week of employment, paying a portion of the employee’s full salary for the days/hours actually worked is allowable. |  Allowable |
| Personal day (Full-day) When no work is performed in a day, full-day deductions from pay are allowable. | Allowable |
| Personal day (Partial-day) If any work is performed in a day, no deductions from salary are allowed. For example, if an employee is absent for one-and-a-half days, an employer may only deduct for one full day. |  Not Allowable |
| Family and Medical Leave Act (FMLA) leave (Full-day) Full-day deductions are allowed when leave is taken under the FMLA. | Allowable |
| Family and Medical Leave Act (FMLA) leave (Partial-day) An employer may pay a proportionate part of the full salary for time worked. For example, if an exempt employee who normally works 40 hours per week uses four hours of unpaid leave under the FMLA, an employer may deduct 10 percent of the exempt employee's normal salary for that week (4/40 = 0.1 × 100 = 10%). | Allowable |
| Sickness or disability without a bona fide leave plan in place, full- or partial-day absence No deduction in pay allowed. | Not Allowable |
| Sickness or disability with a bona fide leave plan in place (Full-day) If an employer has a bona fide paid-leave plan in place (paid sick leave, short-term disability, etc.) and an employee is not yet eligible to participate in the plan or has exhausted his or her leave, a full-day deduction from pay is allowed. | Allowable |
| Sickness or disability with a bona fide leave plan in place (Partial-day) Partial-day deductions are not allowed. | Not Allowable |
| Disciplinary suspension for violating workplace conduct rules (Full-day) Deductions may be made for disciplinary suspensions of one or more full days for infractions of workplace conduct rules, as long as there is a written policy applicable to all exempt employees. Conduct rules would include those regarding harassment and violence, but not issues such as attendance or work quality. | Allowable |
| Disciplinary suspension for violating workplace conduct rules (Partial-day) Partial-day deductions are not allowed. | Not Allowable |
| Major safety violations, full- or partial-day Deductions may be made in any amount. Safety rules of major significance include those relating to the prevention of serious danger in the workplace or to other employees, such as rules prohibiting smoking in explosive plants, oil refineries and coal mines. This deduction does not need to be tied to an absence from work. | Allowable |
| Holiday, full- or partial-day No deductions are allowed unless the employer closes for a full workweek. Policies requiring employees to work the day before and after a holiday are not allowed. | Not Allowable |
| Business closures (weather, emergency, lack of work, etc.), full- or partial-day If an employee is available and ready to work, an employer may not dock an exempt employee’s pay unless no work is available for a full workweek. | Not Allowable |
| Poor job performance No pay deductions are allowed due to the quality of work. | Not Allowable |
| Jury or witness duty or temporary military duty An employer cannot make pay deductions for absences of an exempt employee due to jury or witness duty or temporary military duty, unless the absence is for a full workweek. Salary can be offset by jury or witness duty fees or military pay received by the employee. | Not Allowable |
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