Lisa lost her parking card, and now I have to buy another one from the building office. Oh well, I’ll just dock her pay for the $25 charge. I can do that – right?
Well, not so fast.
You see, docking (or taking deductions from) someone’s pay isn’t just something you can decide to do on your own. There are all sorts of federal, and generally state and local rules around when, if and why you might be able to dock someone’s pay. And even if it turns out you can, you still have to make sure the “how” is right.
So, let’s take a closer look. First off, there are different rules for employees who are eligible for overtime (called non-exempt) and those who aren’t (called exempt). Because you see – a non exempt employee is paid for the hours they work, generally no work, no pay. But exempt employees are paid for producing. So by the same token that they don’t get overtime for working more than 8 hours in a day, they don’t make less money when they work less than 8 hours in a day.
So let’s deal with the non exempt employees first. Like I said, if they don’t work, they don’t get paid. That is, unless the reason they aren’t working is covered in a company program or policy (like a vacation policy, or sidk leave policy). So under the policy, the company would use their accrued time to fill in for the time the person didn’t work.
But what happens if I don’t’ have any sick or vacation time available. Well then, my employer can not pay me for the time I didn’t work. So if I worked 20 hours in a week, and I only had 10 hours of vacation time available, then I’ll only get paid for 30 hours that week.
Now, if I’m an exempt employee – things really change. Again, because I’m responsible for producing, so if I work 8 hours in a day or 10 hours in a day or 3 hours in a day, I’ll get the same pay for the day. I know that may sound unusual, but it’s a common thing – and it’s not just about state rules either (although some states have weighed in as well).
“…you don’t have to pay me … Unless, that is, I make a phone call on Friday or send an eMail. Because both of those things are working, and that would mean that now I actually worked part of Friday, and you can’t dock my pay for a partial day. So voila – I’m getting paid for the full day on Friday.“
The Fair Labor Standards Act (or FLSA) says that if you make unlawful deducitons from an exempt employee’s pay, you may kill their exempt status. And if that happens, then you’re in the overtime, required meal period, required rest period world with that employee. And if you have an employee making $120K a year – I don’t think you want to calculate and pay them an overtime rate for work beyond 8 hours in a day or 40 in a week. So, its in your best interst to keep their exempt classification in tact.
So what do you do when your exempt employee leaves after 4 hours because they have something personal they need to take care of. Well, to be fair there is some guidance around this. You can use an employee’s vacation or personal days (if you have them) to supplement time off due to personal reasons. But again, that’s using their time off bank – not docking their pay. And if they don’t have enough time to cover, then you can dock their pay – but only in full day increments. So, I’m going to be paid for that partial day, no matter what.
So if I leave early on Monday, and I’m out on Tuesday – Friday; you have to pay me for the full day on Monday. But you don’t have to pay me for Tuesday – Friday. Unless, that is, I make a phone call on Friday or send an eMail. Because both of those things are working, and that would mean that now I actually worked part of Friday, and you can’t dock my pay for a partial day. So voila – I’m getting paid for the full day on Friday.
Now, it’s not just using paid time off or PTO that can be used to offset the time I’m out. You can offset my salary by the amount I’m paid from the court while serving jury duty or with my temporary military pay.
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You can also pay me less than a full week’s pay at the beginning or end of my employment – if I work a partial week. Or if I have an intermittent work schedule under FMLA – then you can pay me on an hourly basis without impacting my overtime status.
What about for disciplinary reasons – can you send someone home and not pay them for bad performance. Well, only under very narrow guidelines.
First the non exempt employee. Yes, you can send them home without pay for disciplinary reasons. But you have to be sure the reduction doesn’t accidentally drop their pay below the minimum wage. And there are some state guidelines that require advance notice, or application to future hours vs. retractively – yes, it can get really complicated.
But it’s even more complicated on the exempt side. Bascially the answer is no. Unless you suspend someone because of a serious violation of workplace conduct rules – things like dangerous behavior or sexual harassment. What about things like perfromance issues or poor attendance. Well, the Department of Labor does not consider those to be part of ‘violations of workplace conduct rules’.
Let’s move away from the time worked questions for a minute. What about the parking card. What if someone loses a laptop, or damages a printer, or breaks a table. Can’t I make them pay for it?
In a word – no. Deductions for cash register shortages, damanges or loss of company equipment are not authorized by the DOL And by the way, that goes for making your employee pay for tools as well.
And while, again under some very narrow scenarios, you might be able to deduct from a non exempt employee’s salary – it’s a really bad idea. Number one, because you can’t take out so much that it would effectively put them below minimum wage; and whatever you take out can’t impact their rate calculation for overtime, and in fact it might even be illegal under your state’s rules.
So what deductions can you make? Well, you can deduct for employee benefit premiums like your medical, dental or vision plan. You can deduct for company offered retirement plans, like your 401k. And you can deduct for garnishments – they’re usually court ordered repayment demands, and they require you to withhold a certain amount to pay to the creditor.
And, of course, you can deduct for payroll related taxes and payments, like income tax withholding, medicare, and the like.
So see – it’s a more complicated subject that you might think. Both the Feds and the states are very protective of an employee’s wages, and what can and can’t be subtracted from them. So, step carefully. And if your employee owes you for something, check in with your labor counsel or HR expert before you just go pulling the funds from their next payroll.