What happens when a company classifies its employees as salaried, exempt from overtime but then deducts or docks from the employees’ pay for things like sickness, disability, or personal leave? Can this deduction change an exempt employee to a non-exempt employee? The short answer is “yes.” The rule of thumb under the Fair Labor Standards Act (“FLSA”) is that the regulations do not permit an employer to dock pay from a salaried, exempt employee. Doing so, can cause an entire class of employees to suddenly go from exempt to non-exempt and thus, entitled to overtime. As always, however, there are exceptions to the rule.
To understand the discussion on docking an employee’s pay, you have to start with the basics of the FLSA. To qualify for the administrative, executive and professional exemptions under the FLSA, the employer must pay the employees at least $455 per week on a salary or fee basis. An employee is paid on a salary basis if:
- The employer compensates the employee a predetermined amount each pay period on a weekly or less frequent basis, which makes up all or part of the employee’s compensation;