Exempt Employee Pay Deductions – What Is Permitted?

In general, employers cannot deduct pay from an exempt employee’s paycheck. The amount of money an exempt employee makes is not based on the number of hours she does or doesn’t work.

An exempt employee must receive the full salary for any workweek in which the employee performs any work, regardless of the number of days or hours worked. There are a few exceptions to this rule, however.

Permitted Deductions

The following list is courtesy of TrackSmart:

• Exempt employees do not need to be paid for any workweek in which they perform no work.
• Exempt employees who are absent for a day or more for personal reasons other than sickness or accident. (Note that these deductions must be made only in full-day increments – not for partial-day absences.)
• Exempt employee absences of a day or more caused by sickness or disability, if the company maintains a plan that provides compensation for loss of salary caused by sickness and disability and the employee exhausted his or her “bank” of leave.
• Penalties imposed for violation of safety rules of major significance
• To offset any amounts received by an employee as jury or witness fees or military pay; however, beyond those offsets, deductions may not be made for absences caused by employee jury duty , attendance as a witness or temporary military leave.
• Unpaid disciplinary suspensions of one or more full days for breaking workplace conduct rules.
• Partial weeks worked during the initial or final weeks of employment. For example, if Joe resigns in the middle of a workweek, pay him only for the days actually worked in that week.
• In some cases, when a salaried/exempt employee has worked a reduced or intermittent work schedule under the Family and Medical Leave Act (FMLA). (You can convert a salaried employee to an hourly rate during the time he or she is on intermittent or reduced-workweek FMLA leave without destroying the person’s exempt status.)

Non-Permitted Deductions

• Slow times: Regardless of whether there is enough work for the employee, if the employee is ready, willing, and able, he must be paid.
• Business trips: Employees who travel for work cannot be penalized for the time they are not working while on their trip. Even if the employee will be out of town for the whole week but only actually works two days, he must be paid for the whole week.

What If You Make A Mistake?

If you make an isolated mistake or two and correct it, the DOL may forgive the mistake. However, if the company is clearly making repeated deductions from employee paychecks, there will be consequences.

A single employee or an entire department of employees, depending on the extent of the violations, can be automatically converted to non-exempt employees who must track their time and are eligible for overtime.