Docking Exempt Employees' Time

By definition, exempt workers are paid by salary, which means that they get the same amount of pay per week regardless of how many hours they work in a week. Deducting pay from an exempt employee for absences of less than one day is illegal. You can, however, "dock" an exempt employee's pay for an absence of a whole day.

If an exempt employee calls in sick and plans on being out for the entire day, you can "dock" his or her pay for the whole day and make up for the loss from a sick or vacation leave plan, if you offer those kinds of benefits.

If you do dock an exempt employee for any reason, other than for a major safety violation, that employee loses their exempt status for that pay period, not just that week. If that occurs, then you will have to pay any overtime to that employee that may be due for that pay period. If you make a habit of "docking" exempt employees for absences of less than one day, you risk losing the exemption completely, which could make you liable for back overtime pay over a longer period of time.

Work Smart How do you prove that you do not make a practice of docking exempt employees for absences of less than one day? The best way is to keep payroll records that show that the employee received the same amount of pay for each pay period. The record should also include notations about the amount of sick time, personal leave, or vacation taken during each payroll period, too.

Effective August 23, 2004, the Department of Labor expanded the permitted reasons for docking an exempt employee's pay to include serious conduct violations, such as sexual harassment or violence in the workplace. The new rules also provide that if an employer makes an improper deduction from an exempt employee's pay, the employee's exempt status will remain intact if the employer has a clearly communicated policy, including a complaint mechanism, prohibiting improper pay deductions, reimburses the employee for the improper deduction, and makes a good faith commitment to comply with the rules in the future.