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Improper Salary Deductions Under the FLSA

by Martin Salcedo, Esq. - The Human Equation on 1/8/2013
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The Fair Labor Standards Act limits an employer’s ability to make salary deductions from employees who are exempt from the FLSA’s overtime compensation provisions. Exempt employees must generally receive their full salary for any week in which they perform any work, regardless of the number of days or hours worked. And, the FLSA generally does not allow employers to deduct from an exempt employee’s salary because of variations in the quality or quantity of work performed.

However, there are limited exceptions to the FLSA’s general rule against salary deductions for exempt employees. For example, salary deductions are allowed:

  • when an exempt employee is absent from work for one or more full days for personal reasons other than sickness or disability—deductions for partial days are not allowed;
  • for absences of 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, such as a paid sick-leave policy, short-term disability insurance program or paid workers’ compensation leave;
  • to offset any jury or witness fees or military pay received by an employee;
  • for penalties imposed for infractions of safety rules of major significance which are designed to prevent serious danger in the workplace or to other employees, such as a rule prohibiting smoking in a coal mine;
  • for unpaid disciplinary suspensions of one or more full days imposed for violations of workplace conduct rules, provided such suspension is imposed pursuant to a written policy applicable to all employees;
  • Also, an employer is not required to pay the full salary for an employee’s first or last week of employment, or for weeks in which an exempt employee takes unpaid leave under the Family and Medical Leave Act. In these instances, salary adjustments can be made.

    If an employer has an actual practice of improperly deducting salary from exempt employees, the exemption is lost for the entire time that improper deductions were made for all similar employees working for the same manager who were responsible for the improper deductions. If these employees worked over 40 hours per week, then losing the exemption could easily cost an employer thousands of dollars in unpaid overtime compensation.

    However, if an employer (1) has a clearly communicated policy prohibiting improper deductions and including a complaint mechanism, (2) reimburses employees for any improper deductions, and (3) makes a good faith commitment to comply in the future, the employer will not lose the exemption for any employees unless the employer willfully violates the policy by continuing the improper deductions after receiving employee complaints.

    Since improper deductions can jeopardize an employee’s exempt status, employers must proceed cautiously when implementing salary deductions.

    If you would like to learn more about wage and hour requirements under the Fair Labor Standards Act, click here. If you would like more information about insuring against FLSA claims, click here.

    The Human Equation prepares all risk management and insurance content with the professional guidance of Setnor Byer Insurance and Risk.


5/9/2016 1:18:54 PM #

New FLSA White-Collar Overtime Exemption Rules Are Coming...Maybe Sooner Than You Think!

New FLSA White-Collar Overtime Exemption Rules Are Coming...Maybe Sooner Than You Think!

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