You recently hired a manager and, after confirming you have correctly classified them as an exempt salaried employee, you have them onboard and begin working. However, not too long after they have started, you notice they are leaving early, coming in late, or just not coming in at all. With a nonexempt hourly employee, missing work would result in the employee not being paid for time not worked (and most likely corrective action) but how should this be addressed with an exempt employee? Can their pay be docked? Can you switch them to hourly pay? Classifying an employee as exempt comes with regulations around if and when their pay can be affected. Before we cover how to address attendance issues, let’s look at the dos and don’ts of deducting from an exempt employee’s pay.
Permitted Deductions
Under certain circumstances, an employer is permitted to deduct from an exempt employee’s pay:
- If an employee is absent from work for personal reasons for one or more full days, not including for reasons related to sickness or disability;
- If an employee is absent from work related to sickness or disability for one or more full days if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness such as PTO or paid sick leave. If you have a waiting period before an employee may begin using PTO and they take time off during this waiting period or they have exhausted their PTO for the year, you may still deduct for full day absences;
- To offset amounts employees receive as jury or witness fees, or for temporary military duty pay;
- For penalties imposed in good faith for infractions of safety rules of major significance; safety rules of major significance include those related to the prevention of serious danger in the workplace or to other employees, such as rules prohibiting smoking in explosive plants, oil refineries or coal mines;
- For unpaid corrective action suspensions of one or more full days imposed in good faith for workplace conduct rule infractions; the infraction must be severe, such as violating rules prohibiting sexual harassment, workplace violence or drug or alcohol use or for violations of state or Federal laws. Employers must also have a written policy applicable to all employees in place prior to imposing a corrective action suspension.
- If an employee begins working midweek or terminates midweek. For example, an employee that begins working on a Tuesday does not need to be paid for the Monday prior to their start date; an employee that leaves the company on Wednesday also does not need to be paid for Thursday and Friday after their termination date;
- For unpaid leave taken by the employee under the Federal Family and Medical Leave Act.
Prohibited Deductions
As a general rule, if the exempt employee performs any work during the workweek, they must be paid the full salary amount. An employer may not make deductions from an exempt employee's pay for absences caused by the employer or by the operating requirements of the business. If the exempt employee is ready, willing and able to work, an employer cannot make deductions from an exempt employee's pay when no work is available.
Some examples of prohibited deductions include:
- Partial week deductions because the employer was closed due to inclement weather;
- Partial week deductions due to an employee attending jury duty;
- Partial week deductions due to illness when the employer does not have a bona fide sick leave plan, policy or practice of providing wage replacement benefits such as PTO or paid sick leave;
- Deductions for an unpaid suspension due to attendance or performance issues;
- Deductions due to the employer being closed for a holiday;
- Furloughs for a partial week due to lack of work;
- Deductions for a partial day absence; keep in mind you may use available PTO to cover partial day absences but once this is exhausted, the full day must still be paid. This could be accomplished by advancing PTO, thereby taking their PTO balance into the negative.
How to Address Problematic Attendance
Going back to our initial issue with the new exempt employee missing a large amount of work, how should we address the attendance concerns?
First, we should look at why the employee is missing full days of work. If the missed day is due to personal reasons, such as attending a concert or taking an impromptu road trip, you could deduct for the full missed day. If time was missed due to the employee being sick, you cannot deduct for this time if you do not offer any type of paid leave; if you have a bone fide plan, policy, or practice in place to compensate for absences due to illness, you may deduct the day from the employee even if they do not have enough paid time available to cover the day due to exhausting available leave or not yet being eligible to use paid leave.
Next, we should consider why the employee is missing partial days; this is to avoid running afoul of any federal, state, or local laws that limit adverse action (should you take any) for an employee missing work for protected reasons. While you would not be able to deduct pay from their salary for partial day absences, the missed workdays should still be addressed. If the employee has paid leave available, you can use this time to supplement partial day absences, however, once this time is exhausted you will still be required to pay the full day.
If the employee is missing work due to illness or disability, you should engage in the interactive process to see if there is a need for an accommodation. Although the employee may not have formally requested an accommodation, you still have a duty to engage in this process to remain compliant with the ADA or any relevant state or local laws.
If the employee’s attendance is not due to a disability, then we should address the behavior in the form of counseling, performance review, or other documented corrective action such as coaching, verbal warnings, and written warnings. Keep in mind that an exempt employee is paid a consistent amount, regardless of whether they work 30 hours or 60 hours in a given week so when addressing the issue, it is more effective to address it from the fact their absence has led to work not being completed in a timely manner or being unavailable for necessary meetings instead of them not “sitting in their chair from 8am to 5pm”.
You should also take caution in switching an exempt position to nonexempt as this could give the employee the argument that the position was never truly exempt and is owed overtime for hours worked before being reclassified; if this should happen, the burden is on the employer to disprove this. If you decide to change the employee to nonexempt status, their job duties should change as well to show a distinction between their previous exempt status and new nonexempt status.
Addressing attendance concerns when it comes to exempt employees can seem complicated but being aware of permitted and prohibited deductions as well as when to engage in the interactive process will help you stay compliant with the FLSA and ADA. Need a little extra help or have a complicated situation? Clients of FrankCrum can reach out to their HR Consultant to assist.
