New Guidance from the Department of Labor Regarding Rules Docking Pay

You are not alone if you are uncertain about how and when you can make deductions for absences from an exempt employee’s pay. The Department of Labor (DOL) recently released Opinion Letter FLSA 2018-14 to help make things clearer.  This Opinion Letter tackles an employer’s biggest issues regarding:

  • Legally docking an exempt employee’s pay if they miss work.
  • Calculating those deductions allowable by the Fair Labor Standards Act (FLSA)

The DOL says that it is okay to make deductions from an exempt employee’s wages for an absence of one or more full workdays when the employee doesn’t have any accrued paid leave time available…if the time off is due to personal reasons not due to an illness or disability.

The wages can be reduced by the amount that is equivalent to the time they missed if two full days of work are missed. If it is less than two days, the wages can only be reduced by an amount that is equal to a full day’s pay.

If the absences are due to an illness or disability and you explain to the employee that their pay will be reduced when their paid sick time is exhausted, you are able to make deductions from their pay..

If an exempt employee is scheduled to work a shift lasting shorter or longer than eight hours, employers may also use an hourly or daily rate equal to the employee’s full weekly salary to calculate the deductions, as long as the employee was absent for at least one full working day.

There are other permitted deductions such as when a penalty is imposed for violating major safety rules, offsetting amounts received by employees for military pay, disciplinary suspensions for breaking workplace conduct rules lasting one or more full days, or partial weeks worked for an initial or final week of employment (i.e., if an employee resigns mid-week, employers can pay only for the days worked in that week).

In some cases, under the Family Medical Leave Act (FMLA), when an exempt employee works a reduced or intermittent schedule, their pay can be converted to an hourly rate during this time without compromising their exempt status.

Deductions for absences related to a business trip, lack of work, or damaged or lost equipment are not permitted.

If a situation ever comes up and you’re just not sure, you can always contact Linda Pappajohn, our HR consulting director, for clarification.

Santora CPA Group
Call us 302-737-6200