You’re confused about the pay-docking rules laid out by the Fair Labor Standards Act (FLSA). You’re not alone. The regulations are about as clear as mud. As a general guideline, the FLSA prohibits deductions from exempt employees. Also, the regulations state that salaried staff can’t have their pay modified (i.e. deducted) based on the number of days or hours he or she works.
Deductions also cannot be dependent on the quantity or quality of work the employee produces. However, there are several important exceptions to this rule. If your company accidentally makes an improper deduction, nothing bad will happen to you. If it’s an isolated incident, just correct the mistake, and move on.
If it’s an ongoing thing, though, and you’re caught, entire departments of exempt workers can become OT-eligible via the rules outlined in the FLSA. That’s going to suddenly and immediately drive up labor costs.
Many employers are confused about the new FSLA labor and overtime regulations. However, the list of permitted and prohibited deductions can be essentialized as follows:
- Exempt employees are absent for a day or more for personal reasons other than sickness or accident.
- Exempt employees don’t need to be paid for weeks when they do not work.
- Exempt employees who are absent because of a sickness or disability, but where you (as the employer) provide and maintain a plan that compensated for loss of salary caused by sickness and disability and the employee has exhausted their “bank” of funds used for leave.
- If employees violate safety rules of major significance.
- You may deduct pay to offset amounts received from jury duty or witness fees or military pay – you may only deduct amounts to offset the fees paid for jury duty, witness, or military pay and no more.
- One or more full days for violating workplace conduct rules
- Partial weeks worked during initial or final weeks of employment.
- When a salaried employee worked a reduced work schedule under the Family and Medical Leave Act (FMLA).
Business trips cannot be deducted from salary.
- Lack of work without layoff or temporary leave – you cannot deduct pay for times when the employee is at work but there is little or no work to assign.
Who qualifies as a nonexempt employee? Only employees entitled to overtime pay are nonexempt. Hourly employees would be an example of nonexempt employees. Salaried employees would be an example of exempt employees – as long as those employees earn at least $455 per week and pay is not adjusted based on performance or quality of work or number of days worked.
Any employee paid less than $455 per week, or $23,600 per year, is nonexempt. Some jobs are classified as exempt by definition. For example, an “outside sales” rep is exempt, as are all independent contractors (since they are technically not employees). For most employees, however, the exemption status is determined by how they are paid, what they are paid, and what kind of work they do. Make sure you understand the status of your employee before attempting to apply any of these rules.