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Do you know the rules for docking employee pay for exempt and nonexempt workers? There can be some gray area and it's important to understand what's permissible by law. This presentation walks you through what you need to know.
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Docking
Employee Pay
Know the Rules for
Salary Deduction
What are the rules for
reducing employee pay?
First, you must know the difference between an
exempt and a nonexempt employee.
Department of Labor Fair Labor Standards Act.
Exempt
Generally, these are your
salaried workers. They are not
covered by the Fair Labor
Standards Act (FLSA).
Nonexempt
These workers are protected by the FLSA, which specifies minimum wage andovertime rules.
They are required by law to be paid the minimum wage for all hours worked.
Docking Exempt Employee Pay
Exempt employees are protected from docked pay because they are not covered under overtime or minimum wage rules.
But that’s not always the case.
Permissible Salary Deductions for Exempt Employees
• When no work is performed for a workweek.
• When absent for a day or longer not related to an accident or sickness.
• If a penalty is being imposed for a violation of company policy.
• Unpaid suspension for breaking a conduct rule.
• If the employee only works a partial week when starting or finishing employment.
Before you make any
decision on whether to
dock the pay of an exempt
employee, it is essential
to determine if the salary
deduction is permissible
by law.
Docking Pay for Nonexempt Employees
Nonexempt employees are required by law to be paid the minimum wage for all hours worked.
They must also be paid overtime if they work more than 40 hours in a workweek.
Are you allowed to dock nonexempt employee pay?
Most employers shy away from doing so.
However there are cases in which you are allowed to dock pay to penalize a worker for violating a particular policy.
Note: An employer cannot refuse to pay a nonexempt worker for any hours that the person has worked.
If a nonexempt employee is absent from work or misses the entire workday, you are permitted to dock his or her pay for the hours missed.
However, you are required to do so based on the normal operating hours of your business as well as the company’s attendance policy.
Permissible Cases Where You can Dock Pay for a Nonexempt Worker
With all this in mind, the FLSA does not prohibit employers from cutting a worker’s
hourly wage as a punishment.
As long as the nonexempt worker is paid the minimum wage, the employer is allowed to dock pay by reducing the hourly wage.
But employers are not allowed to hold back payment for hours that have already been worked.
Note: Employers are not permitted to dock the pay of a minimum wage worker who has violated a company policy.
There is a lot of gray area when it comes to docking pay for nonexempt employees.
Before doing this, an employer must make sure they know the ins and outs of the Fair Labor Standards Act,
ensuring that they do not break the law whenadjusting the pay of the worker.
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