Can Your Employer Dock a Salaried Exempt Employee’s Pay? The Salary Basis Rules
Can your employer dock a salaried exempt employee’s pay?
Being salaried and exempt from overtime usually means no overtime pay. In exchange, the Department of Labor’s salary basis rules limit when your employer can cut your paycheck. Improper deductions can cost the employer the overtime exemption.
- An exempt employee generally must receive the full salary for any week in which they do any work, regardless of days or hours worked.
- No deductions for absences caused by the employer or the business, such as a slow week, if you’re ready, willing and able to work.
- Full-day deductions are allowed for personal absences (not sickness), unpaid disciplinary suspensions under a written policy, and certain other situations.
- An employer with an actual practice of improper deductions loses the exemption for the affected employees during that period.
The general rule
Under 29 CFR 541.602, salary basis, you’re paid on a salary basis if you regularly receive a predetermined amount each pay period that “is not subject to reduction because of variations in the quality or quantity of the work performed.” An exempt employee “must receive the full salary for any week in which the employee performs any work without regard to the number of days or hours worked.”
Deductions can’t be made for absences “occasioned by the employer or by the operating requirements of the business.” If you’re ready, willing and able to work, a slow week isn’t a reason to cut your salary.
Allowed deductions
- Personal days: full-day absences “for personal reasons, other than sickness or disability.” If you’re out a day and a half for personal reasons, only the full day can be deducted.
- Sickness: full-day absences for sickness or disability, but only under a bona fide plan, policy or practice that compensates for salary lost to sickness or disability.
- Major safety rules: good-faith penalties for violating “safety rules of major significance.”
- Discipline: unpaid suspensions “of one or more full days” in good faith for workplace conduct rules, under a written policy applying to all employees.
- Jury duty, witness fees, military pay: the employer may offset amounts received against salary for that week.
- FMLA: during unpaid Family and Medical Leave Act leave, the employer may pay a proportionate part of the salary.
When improper deductions cost the exemption
Under 29 CFR 541.603, effect of improper deductions, an employer that makes improper deductions “shall lose the exemption if the facts demonstrate that the employer did not intend to pay employees on a salary basis.” An actual practice of improper deductions shows that. The exemption is lost for the period of the deductions, for employees in the same job classification working for the managers responsible.
Isolated or inadvertent deductions don’t cost the exemption if the employer reimburses them. A clearly communicated policy against improper deductions, with a complaint mechanism, reimbursement and a good-faith commitment to comply, also protects the employer unless it willfully keeps violating the policy.
What to do
- Compare each paystub to your salary and note any partial-day deductions.
- Ask HR, in writing, to explain and reimburse an improper deduction.
- Keep copies of your employer’s pay policies.
Related: the exempt salary threshold and overtime pay rules.
General information, not legal advice. State laws vary; check your state labor department or an employment attorney for your situation.
Header image: Photo: “Two men at desk doing paperwork – DPLA – df279bdca40ff3fa88689a4575bd93f4” by Abdalian, Leon H., 1884-1967, PUBLIC DOMAIN (cropped).