There are very limited circumstances under which an employer is allowed to take a deduction from an exempt employee’s salary, and employers who take a deduction when they shouldn’t risk the employee’s classification. This means an employee who had been classified as exempt could claim that the employer was treating them like an hourly employee by taking the prohibited deduction. The employee could then sue for back pay for all overtime they had worked without additional compensation.
Deductions are not allowed for...
Any partial day absence
Any partial day absence, for any reason, whether 15 minutes or 7.75 hours. If the employee does any work at all they must be paid for the entire workday.
Full-day absences without sick leave plan
Any full day absence for sickness or disability if the employer does not offer a bona fide sick leave plan. Bona fide sick leave plans offer at least five days of paid leave per year that may be used for illness. If a bona fide plan is offered and an employee has used up all of their time, the employer may make a deduction for a full day absence only in the case of sickness or disability.
Jury duty, witness or military leave
For absences resulting from jury duty, serving as witness, or temporary military leave, unless the employee performs no work at all during the workweek. Employers may, however, reduce pay by any amount received for those services (such as a $15/day stipend paid by the county for serving on a jury).
To learn more about when payroll deductions are permissible for exempt employees, check out this fact sheet from the United States Department of Labor, Wage and Hour Division.
DISCLAIMER: The information provided herein does not constitute the provision of legal advice, tax advice, accounting services or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional legal, tax, accounting, or other professional advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation and for your particular state(s) of operation.
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