Color Within the Exempt Salaried Lines With Unpaid Time Off in Business and at Work

As we enter the fourth quarter of 2015, employees who earn paid time off on a calendar-year basis are running out of paid time off.  And some employers are grappling with the somewhat illogical rules for exempt (e.g., exempt from overtime) salaried employees’ use of unpaid time off once paid time off is exhausted.

However, it’s important to follow these rules, on the state and federal level, in order to preserve the exempt salaried status of these employees – if exempt status is not preserved, the employee may be deemed nonexempt, and years of back pay in the form of unpaid overtime and penalties may be owed by the employer.  Bottom line: if a salaried exempt employee works part of a day, goes home early and has no paid time off left, they must still be paid for a full day (not logical, I know – it’s what keeps them exempt salaried).

From the Federal DOL website (emphasis mine):

Deductions from pay (for exempt employees) are allowed:

In addition, deductions may be made from the pay of an exempt employee of a public agency for absences due to a budget-required furlough, and special rules apply when such employees take partial-day (or hourly) absences not covered by accrued leave.

Each of these allowable deductions is described elsewhere in the Compensation Requirements section.

Deductions for partial day absences generally violate the salary basis rule, except those occurring in the first or final week of an exempt employee’s employment or for unpaid leave under the Family and Medical Leave Act. If an exempt employee is absent for one and one-half days for personal reasons, the employer may only deduct for the one full-day absence. The exempt employee must receive a full day’s pay for the partial day worked. Other examples of improper deductions include:

  • A deduction of a day’s pay because the employer was closed due to inclement weather;
  • A deduction of three days pay because the exempt employee was absent for jury duty;
  • A deduction for a two-day absence due to a minor illness when the employer does not have a bona fide sick leave plan, policy or practice of providing wage replacement benefits; and
  • A deduction for a partial day absence to attend a parent-teacher conference.

How will you color within the compliance lines to preserve the status of your exempt employees in business and at work?

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