Tag Archives: Exempt employees

Docking A Salaried Employee’s Pay is Tricky

Paying an exempt employee on salary means that employee receives the same amount of money each week regardless whether the employee works 35 hours or 45 hours. There are benefits for both you and the employee because you don’t have to calculate overtime and the employee doesn’t have to religiously track work hours.

Interestingly, employers ask me all the time about docking that weekly salary of an exempt employee. For some reason, if a salaried worker misses a half-day for a child’s school field trip or a distant relative’s funeral, suddenly employers want to dock the employee’s salary, possibly because the reason for missing work seems trivial. But that’s legally not how salaries work within the context of the federal Fair Labor Standards Act (“FLSA”).

The FLSA requires that a salaried, exempt employee be paid a “fixed” weekly salary of at least $684 that cannot be docked regardless of the quantity or quality of work. One way to think about it is to tell yourself that a salaried, exempt employee earns her whole salary for the week by Monday morning at 8:05 a.m.

So if your marketing director is paid $1000 per week, she has to be paid $1000 even for the weeks when she goes home on two separate workdays after lunch because she is sick or when she recklessly spends $20,000 of the company’s funds on an unsuccessful marketing campaign. You cannot deduct from her pay just because she did not work the quantity of hours you expected or perform her job with the quality that you expected.

There are legal deductions you have to take from a salary when required by law (for example, income tax withholding, payroll taxes, child support) and legal deductions you can make for items that are authorized in writing by the employee (for example, health insurance premiums, retirement contributions, salary advance repayments).

But the FLSA is extremely strict when it comes to the employer deducting from an exempt employee’s salary for missed days or poor work.

Here are the absences and acts for which a Texas employer cannot dock a salaried, exempt employee:

Continue reading Docking A Salaried Employee’s Pay is Tricky

Employer End of the Year Tasks: W-4 and Salary Minimum

Employers must address two important employment law issues before the end of 2019:

  1. Changing the exempt status of employees making a salary of less than $35,568 per year, and
  2. Adoption of the new W-4 form.

I’ve previously explained the new salary minimum for exempt (salaried) employees. In summary, for you to legally pay an employee on salary, that employee must perform exempt duties (such as running a division of the company, performing professional work such as a CPA, or performing non-profitable office duties requiring independent discretion and judgment, such as human resources, benefits coordinator, safety director, marketing director, and others, but not secretarial or bookkeeping) and make at least the new salary minimum per week of $684.00.

If an employee of yours does not meet both of these criteria (exempt duties + salary minimum), you must pay that employee by the hour and pay overtime if the employee works more than 40 hours in any one workweek. In other words, you must change the employee to a non-exempt status under the Fair Labor Standards Act and make that person an hourly employee.

There are a few exceptions to this new salary minimum rule: teachers, doctors, lawyers and outside salespersons are not subject to the salary minimum test. There are also some very  industry-specific, narrow exceptions for taxi drivers, truck drivers, fisherman and some other strange exemptions from overtime that don’t have salary minimums. But the vast majority of workers paid on salary are affected by the requirements of the exemptions.

If you are having any difficulty deciding whether to change an employee to hourly or determining if their duties meet the tests for executive, administrative or professional jobs, please call your employment lawyer immediately to get you into compliance for the January 1, 2020 effective date on the salary minimum rule.

The other big change you as an employer should be aware of is the new W-4 form that the government released on December 5, 2019. It is supposed to be easier to use for your employees.

Here are the things you need to know about this new W-4 as you start the new year:

  • You must use this new W-4 form for any employee you hire beginning on January 1, 2020 and thereafter.
  • Any employee who wants to adjust his/her withholding on January 1, 2020 or after must use the new W-4 to make that adjustment.
  • Current employees do not have to fill out a new W-4 if they don’t want to make any changes, but should consider filling out a new one if they faced an unexpected penalty of bill last year or will have a change in 2020 such as marital status, a new baby or a change in income.
  • Employees filling out the new W-4 must complete steps 1 and 5 on the new form, but may complete steps 2, 3, and/or 4 if applicable. So if you have a new employee fill out the W-4 after New Year’s Day, just check that steps 1 and 5 are complete.
  • Because it is an unfamiliar form and because it encourages people to use the IRS’s new online Tax Withholding Estimator, you should allow employees to take the new W-4 form home so they can have some time to understand and complete it.