What Can You Deduct From an Exempt Employee’s Salary?


Dustin Paschal here with the law firm of Simon Paschal and this week’s edition of Simon Paschal Says. We’ve previously talked about the overtime exemptions, the white collar exemptions, administrative, executive, professional, the exemptions from overtime. What we want to delve into a little more in this installment is the salary requirement for those exemptions. If you recall those exemptions, in order for the employee to be exempt requires a couple of different methods of payment. Either a fee basis payment, which we’ll talk about in a different video, or salary of at least $455 per week. The computer exemption obviously has an hourly wage also, but that’s for another video. For this one, the salary requirement of $455 per week, it must be paid as a salary.

The question comes up a lot is, “What can I deduct from the salary and maintain the exemption for overtime?” The Department of Labor rules are pretty explicit that you cannot deduct for the quantity or quality of the employee’s work. That’s the whole point of salary. But there are a few things that you can deduct for. First of all, you do not have to pay a full week’s salary for the first week of an employee’s employment or the last week of an employee’s employment. Other than that, any week in which the employee performs any work, the employee must be paid his or her full salary of at least $455 per week, absent these other exceptions.

The other ones are that you can deduct for one or more full days, remember that’s full days, not partial days, if the employee is absent due to personal reasons other than sickness or disability. You can deduct one or more full days for sickness if you have a PTO plan. If you have some sort of written designated plan in which you pay employees for time off related to sickness, then you can deduct one or more full days pay for an exempt employee if they’ve exhausted that PTO leave.

You can also deduct from an exempt employee’s salary to offset any jury or witness fees that the employee receives or any military pay the employee receives for being absent. You can also deduct for penalties related to significant safety violations, but those have to be in good faith, the deductions have to be in good faith. You can also deduct for unpaid suspensions of one or more full days if those are imposed in good faith for workplace conduct rule infractions. You can suspend an exempt employee if they violate workplace rules and you can make those unpaid suspensions.

The final one is that you can deduct from an employee’s pay for weeks in which the employee uses FMLA leave. If they’re on an intermittent FMLA and they use a couple of days during the week, you can deduct from their salary for those weeks in light of the fact that they’re using FMLA pay.

Those are the exceptions where you can deduct from an exempt employee’s salary. Other than those limited exceptions, in order for the employee to maintain the exemption, you must pay that employee at least $455 per week of salary for any week in which the employee performs any work. That means even if they just work one day during the week, you got to pay him the full salary for the week. Keep those kinds of rules in mind when you’re figuring out your exempt employees.

That is this week’s Simon Paschal Says, we hope you’ll join us next time.

 

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