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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