Deductions from a guaranteed salary are allowed only in limited circumstances.
Deductions from pay are permissible: when an exempt employee is absent from work for one or more full days for personal reasons other than sickness or disability, or is absent for one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness; to offset amounts employees receive as jury or witness fees, or for military pay; for penalties imposed in good faith for infractions of safety rules of major significance; or for unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions. Also, an employer is not required to pay the full salary in the initial or terminal week of employment, or for weeks in which an exempt employee takes unpaid leave under the Family and Medical Leave Act. SS 541.602(b).
Follow-up Question: If an exempt-employee (who is without accrued benefit time) is absent (full days) from work for part of a week due to their own sickness/disability do they get paid for the whole week?
Answer: Yes, they get paid the full week's salary.
Follow-up Question: If employee without benefit time is absent (full days) from work for a whole week due to their own sickness /disability do they get paid for the whole week?
Answer: Employers may take partial day deductions from an employee's leave bank, even if the deduction results in a negative leave balance; however, an employer may not dock an exempt employee's salary for a partial day absence. Under the final rules, employers may take deductions from employees' leave accounts for partial day absences, the same as under the old regulations. The preamble specifically states that "employers, without affecting their employees' exempt status, may take deductions from accrued leave accounts...." 69 Fed. Reg. at 22178. The preamble also cites approvingly to a number of Wage and Hour Division opinion letters allowing deductions from accrued leave accounts. Additional opinion letters, dated December 4, 1998, May 27, 1999, and February 16, 2001, similarly provide that employers may reduce the amount of accrued paid leave in an employee's Paid Time Off plan, even if the employee is absent only for a partial day. The employer may reduce the leave so that the employee has a negative leave balance. However, the employee must receive the full guaranteed salary, even if there is no leave in the account or there is a negative balance, if the employee has only a partial day absence." (see http://webapps.dol.gov/elaws/whd/flsa/overtime/cr4.htm#2)
Also, in order for executive, administrative, or professional employees to be considered exempt under the FLSA, such employees must be paid on a salary basis. Employees are considered to be paid on a salary basis within the meaning of the Act if under their employment agreements they regularly receive in each pay period a predetermined amount which is not subject to reduction because of variations in the quality or quantity of the work they perform. The only exceptions under which an employer may make deductions from an employee's salary without disturbing that employee's "salaried" status are when:
- the employee is absent from for one or more full days for personal reasons other than sickness or disability;
- the employee is absent for one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness;
- the deduction is used to offset amounts the employee receives as jury or witness fees, or for military pay;
- the deduction is a penalty imposed in good faith for infractions of safety rules of major significance; or
- the deduction is for an unpaid disciplinary suspension of one or more full days imposed in good faith for workplace conduct rule infractions, such as for sexual harassment or workplace violence.
Thus, because employees must receive their full salaries for any week in which they perform work without regard to the number of days or hours worked in order to be considered exempt from the minimum wage and overtime provisions of the FLSA, the effect of subjecting an exempt employee's pay to unpermitted deductions for being late or absent is that the exemption is inapplicable to that employee during the entire period when such deductions were made.
Indeed, such deductions are antithetical to the concept of a salaried employee, because a salaried employee is compensated not for the amount of time spent on the job, but rather for the general value of services performed. It is precisely because executives are thought not to punch a time clock that the "salary test" for such employees requires that their predetermined pay not be subject to reduction because of variations in the quantity of work performed, especially when hourly increments are at issue. (source: Commerce Clearing House)
Follow-up Question: For an exempt-employee where an absence is for one or more full days due to sickness or disability and a the deduction is made in accordance with a bona fide plan, policy, or practice of providing compensation for salary lost due to illness;
does this mean deductions from pay are permissible if made in accordance with bona fide plan, policy? And .......what is considered a bona fide plan, policy?
Answer: Yes, deductions from a bona fide policy/plan are permissible for sickness/disability (however keep in mind that this means that the employee is still getting their normal paycheck).
A "bona fide plan, policy" has been defined by the Department of Labor as a "...benefits that have been communicated to eligible employees, and that operates as described in the plan, will in general qualify as bona fide. In addition, to be bona fide, the plan must be administered impartially, and its design should not reflect an effort to evade the requirement that exempt employees be paid on a salary basis.... It is also our position that a reasonable number of absences on account of sickness ordinarily must be allowed without loss in pay to exempt employees.... The Wage and Hour Division, however, previously has approved leave plans that allow for at least 5 days of sick leave per year as bona fide under the regulations.... Moreover, with respect to a qualifying period, the Wage and Hour Division previously deemed a leave plan that required one year of service prior to payment of sick pay benefits to be bona fide." See www.dol.gov/whd/opinion/flsa.htm#2006, September 14, 2006, FLSA2006-32 letter.
For more information, see the DOL Wage/Hour Field Operations Manual (May 2016) and specifically 22g13 and 22g14.