Spotting Illegal Pay Deductions: Tips for Salaried Employees

It’s 1:30 on a Thursday afternoon. You haven’t felt well all day, and now, ever since lunch, you’ve had a pounding headache. None of your work is getting done, and all you want is to go home and sleep—or maybe go to the doctor. You decide to pack up and leave work early, getting some much-needed rest. But the next day, when you receive your paycheck, you see that your employer has deducted several hours’ worth of pay due to your afternoon absence. “Fair enough, that makes sense,” you think. But in some cases, this type of pay deduction is actually illegal.

Most jobs are governed by the Fair Labor Standards Act (FLSA), an important federal labor law. Employees whose jobs are covered by the FLSA are classified as either “exempt” or “non-exempt” employees. Non-exempt employees are not exempt from coverage under any of the FLSA’s provisions, including its rules regarding overtime pay. Exempt employees, meanwhile, are excluded from coverage under the FLSA’s overtime rules, and their payment is handled differently. While this means that exempt employees are not eligible for overtime pay, there are other rules that come into effect regarding their compensation. One of these rules makes it illegal for employers to dock exempt employees’ pay for any reason.

So, how can one determine one’s exemption status? In order to be considered “exempt,” an employee must meet three different requirements: first, they must be paid at least $35,568 per year ($684 per week); second, they must be paid on a salary basis; and third, they must perform exempt job duties. These duties are considered relatively high-level work, and typically belong to job categories involving “executive,” “professional,” or “administrative” work. No matter what your job title, it is the duties that you perform which really matter. Supervisory or management positions, highly trained, academic, or very intellectual jobs, and some upper-level administrative positions are some examples of typically “exempt” positions. Outside sales professionals, who call on customers outside the office, are also exempt employees.

If, as an exempt employee, you ever find yourself in a situation like the one discussed above, you should be aware that employers are simply not allowed to dock your pay for leaving work early because of illness—nor for any other reason at all. If you have an appointment, a commitment, an outside meeting; if you need to pick up your children from school early or take care of a sick friend or family member; even if you simply are tired of working and decide at 10 a.m. that you need the rest of the day off—it doesn’t matter. As long as you show up to work that day (or do anything work-related, as a remote employee), your employer may not legally refuse to pay you for the hours you take off from work.

Further, an employer may not make deductions from an exempt employee’s pay even if the absence is due to the operating requirements of the business, or is otherwise out of the employee or employer’s control. No matter the circumstances, if you are ready, willing, and able to work, your employer must pay you for a typical day’s work, even when no work is available.

If your employer does illegally deduct your pay in a given week, he or she is effectively treating you as a non-exempt employee, rather than an exempt one. Since employers are ultimately the ones determining their employees’ exemption status, based on job duties and other factors, this change in status is legally binding. So, if your employer is treating you as non-exempt in one way (e.g. docking your daily pay), he or she must treat you as non-exempt in every way. You’re now no longer exempt from the overtime pay regulations required under the Fair Labor Standards Act, and your employer must start paying you time-and-a-half for every hour over 40 that you work each week. But that’s not all! By docking your pay and thereby reclassifying you as a non-exempt employee, your employer becomes responsible for back overtime pay, which can easily amount to thousands of dollars—good for you, but bad for them. Employers’ attempts to save a few dollars by docking your pay one day can quickly backfire.

Despite this, while employers can’t legally refuse to pay you for leaving work early as an exempt employee, remember that they do still have the right to discipline you in other ways. You could be demoted, docked vacation time, or even fired if the transgression is severe. Additionally, remember there are some scenarios where pay deductions for exempt employees are legal (for full days of work only, not partial days). They include:

• When an employee is absent from work for one or more full days for personal reasons other than sickness or disability;
• For unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions;
• For unpaid leave taken by the employee under the federal Family and Medical Leave Act (FMLA).

A complete list of permissible pay deduction scenarios can be found on the U.S. Department of Labor website.

If you have any questions about your status as an exempt or non-exempt employee, about the Fair Labor Standards Act, or about your rights regarding wage and hour laws, please feel free to contact the Law Office of Christopher Davis at (646) 430-7930.

If you believe that your employer may have illegally docked your pay, whether the issue is ongoing or in the past, we’d like to help you. Please call our office at (646) 430-7930, or fill out our contact form here. We would be happy to offer you a free case evaluation.