Deductions from an Exempt Employee’s Salaried Wages

Is it okay to make deductions from an exempt employee’s salaried wages if the person misses work and has no paid leave time?

Absenteeism is an issue employers must deal with in virtually all lines of work. Consequently, there are laws governing employer’s ability to deal with absenteeism issues. Although docking the pay of exempt employees is generally discouraged, taking the time to learn which employee absences are allowable wage deductions will save you problems down the road should an exempt employee ever challenge their status.

The department of Labor (DOL) hasn’t always been clear about when you’re able to make deductions from exempt employee’s pay if they’re absent from work, but now the DOL has issued Opinion Letter FLSA 2018-14 as a guide to make sure you’re paying employees on a salary basis.

If an exempt employee misses one full day of work or more, his or her salary can be reduced by the amount that is equal to the time missed. However, if the person misses a day and a half of work, for example, the salary can only be reduced by an amount equal to a full day’s pay. If the employee misses two full days of work, their salary can be reduced by two full days of pay. If the employee misses two and a half days, you can still only deduct the full days, not the partial day.

The same goes for absences due to sickness or disability, as long as deductions are made “in accordance with a bona fide plan, policy or practice of providing compensation for loss of salary occasioned by such sickness or disability.”