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:
- Taking a partial day off for personal reasons. If any work at all is performed that day, the employer cannot dock any salary for that day.
- Taking a sick leave full day or partial day for employee illness unless you have a bona fide (read: in writing and consistently applied) sick leave or paid time off policy in place. If you do have a bona fide leave plan in place, you can deduct time from that leave bank (meaning that the employee’s available time off is reduced but the employee still gets paid the full weekly salary). If your employee has not yet qualified for your bona fide leave program or has exhausted all leave, you can deduct full-day absences only from the weekly salary for employee illness.
- Holidays that aren’t worked, whether involving a partial or full day absence (unless the employer is closed for the whole week and no work at all is performed during that week).
- Weather or other business closures for emergencies or lack of work (full or partial day). The employee was ready and able to work, and the closing is not within the employee’s control, so the employer cannot dock any pay.
- Poor job performance (other than a significant violation of a major safety policy like smoking around combustible materials. But this is a very rarely upheld exception).
- Jury duty, witness testimony, or voting leave.
- Temporary military leave (unless the entire workweek is missed).
There are a few times that a Texas employer can dock the fixed weekly salary of an exempt employee:
- During the first or last week of employment when the employee does not work the entire workweek. So if an employee starts work on a Wednesday of a workweek that begins on Monday, you can pro rate that salary during that week only.
- Personal time off for a full workday, unrelated to an employee illness. If your employee has tickets to the Super Bowl and misses Friday and Monday to travel, you could dock the employee’s salary one day in both of those two workweeks. However, most employers have paid time off or vacation leave programs that would cover the salary of that employee for those two days. Also note that this personal time off exception only applies to full day absences, so if your employee worked Friday morning and returned to work Monday at noon, you couldn’t dock any pay, because as stated above, salary deductions for partial day absences for personal reasons are not allowed by the FLSA.
- FMLA time off (full day or partial day). If you employ more than 50 people and are therefore subject to the Family and Medical Leave Act, the days an employee is absent for approved FMLA leave do not have to be paid, so you can dock the weekly salary for those absences. Also, if the employee is taking intermittent FMLA leave for partial days, for example to go to a physical therapy appointment during the workday, you can dock the weekly salary on a pro rata basis for the time missed for FMLA leave.
- Disciplinary suspension for full days. If you have to suspend a salaried employee for one or more full days because the employee created a disciplinary problem, you can dock the salary as part of the punishment of suspension. In other words, the suspension can be “without pay”.
- Major safety violation punishment (full or partial days). As discussed above, this is a very rare exception and the employer would have to prove that there was a safety program in place and the employee blatantly violated it, endangering himself or others.
As an employer, you must realize that the federal and state governments regard paying employees properly very seriously. Docking a salaried exempt employee’s pay is a very fast way to get audited and penalized. One of the worst and most common penalties is for the Department of Labor to declare that the employee was not treated as an exempt employee because his pay was improperly docked, and he is therefore due overtime pay (times two) for all overtime hours worked in the last two years.
So be very careful before you ever dock a salaried, exempt employee’s pay. If your salaried employee is repeatedly missing work without a good excuse or performing poorly, your remedy is to retrain, demote, reassign, warn or fire the employee, not to dock his pay.