What Deductions Are Allowed From an Exempt Employee’s Salary Under the FLSA?

The Fair Labor Standards Act (FLSA) authorizes employers to make deductions from an exempt employee’s salary under certain circumstances.  The salary basis requirement that applies to certain FLSA exemptions requires that employees generally must receive a predetermined amount of compensation during each week in which work is performed, regardless of the quality or quantity of work.  The primary exceptions to this rule permit salary deductions in the following circumstances:

  • Full-Day Absences for Personal Reasons:  Deductions may be made when an exempt employee is absent from work for one or more full days for personal reasons, other than sickness or disability.
  • Full-Day Absences for Sickness or Disability That Are Compensated Pursuant to a Bona Fide Plan:  Deductions from pay may be made for absences of one or more full days occasioned by sickness or disability (including work-related accidents) if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for loss of salary occasioned by such sickness or disability (e.g., short-term disability insurance or workers’ compensation insurance).
  • Off-sets for Jury Fees, Witness Fees, or Military Pay:  While an employer cannot make deductions for absences due to jury duty, attendance as a witness, or temporary military leave, the employer can off-set any amounts received by an employee as jury fees, witness fees, or military pay against the employee’s salary.
  • Penalties for Violating Major Safety Rules:  Deductions may be made for penalties imposed in good faith for infractions of safety rules of major significance (e.g., smoking in explosive plants, oil refineries, or coal mines).
  • Full-Day Suspensions for Violating Rules of Conduct:  Deductions may be made for disciplinary suspensions of one or more full days imposed in good faith for infractions of workplace conduct rules.  The suspensions must be imposed pursuant to a written policy applicable to all employees.
  • The Initial or Terminal Week of Employment:  An employer is not required to pay the full salary in the initial or terminal week of employment.  Instead, the employer may pay a proportionate share of the employee’s salary for the time actually worked during the first or last week of employment.
  • Family and Medical Leave:  When an exempt employee takes unpaid leave under the Family and Medical Leave Act (FMLA), the employer may pay a proportionate share of the employee’s salary based on time actually worked during that week.

See 29 C.F.R. § 541.602(b).

Takeaways:  Employers can reduce costs by taking permissible deductions from exempt employees’ salaries under the FLSA.  Employers should be careful not to take impermissible deductions from an exempt employee’s salary, however, because that may jeopardize the employee’s exempt status under the FLSA.

About Michael Miller

Michael is a Chambers-rated attorney in Briggs and Morgan's Employment, Benefits, and Labor group and is head of the firm’s Employment Law Counseling and Compliance practice group. He has 25 years experience counseling employers to prevent unwanted litigation and advises companies of ongoing changes in federal, state and local employment law. Michael advises employers in all areas of employment law including discipline and discharge, leaves of absence, wage and hour compliance, non-compete and confidentiality agreements, affirmative action plans, background checking, and drug/alcohol testing. For Michael's full bio, click here.

Posted on December 10, 2012, in Wage and Hour and tagged . Bookmark the permalink. Leave a comment.

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