CAN THE EMPLOYER MAKE DEDUCTIONS FROM AN EXEMPT EMPLOYEE’S SALARY?

It is important to remember that except for certain types of employees in the computer software field, exempt employees must be paid on a salary basis, otherwise, that employee will lose their exempt status and, thus, will be entitled to overtime. 

Assuming that the employee satisfies both the duties requirement and the salary requirement for the exemption, there are circumstances where an exempt employee will still lose his/her exempt status if an employer incorrectly deducts money from an exempt employee’s salary. If this happens, the employee is entitled to overtime. 

Here are examples of proper deductions:

1. The employer does not have to pay the employee any salary for the week if the exempt salaried employee performs no work during that week. 
2. The employer can make a pro rata deduction from the salary if the exempt salaried employee is absent for a full day or more on personal business. 
3. If the employer has a Paid Time Off policy (PTO) (as opposed to a sick leave policy), and the exempt employee exhausts the PTO, the employer can deduct the salary for partial day absences as long as the absence is at least four hours.

Here are examples of improper deductions:

1. If the employee does not get sick days, an employer cannot deduct anything from the salary if the employee takes a sick day.
2. If an exempt employee performs any work during the work day and then takes the day off, no deduction may be made from the exempt employee’s salary. 
3. No deduction may be made from the salary of an exempt employee for absences occasioned by sickness or accident unless the exempt salaried employee performs no work during that week. 
4. If the employee is ready, willing and able to work, deductions may not be made for the time when work is not available. But, if the business is closed for the entire week, the employer does not have to pay employees for that week even if the employee is ready, willing and able to work. 
5. No Deduction From The Employee’s Salary May Be Made For Absences Occasioned By The Employer Or By The Operating Requirements Of The Business if the absence is less than a week. (i.e., if the employer shuts down the office for two days). 

Deductions may be made for absences in increments of full working day occasioned by sickness or disability (including industrial accidents) if the deduction is made in accordance with a bona fide plan, policy or practice of providing full compensation for loss of salary occasioned by both sickness and disability and the employee has exhausted his or her leave under the policy. In other words, an employer cannot deduct for sick days unless it first gives the employee some sick days to exhaust and the employee in fact exhausts those sick days.