The minimum wages of employees for exempt and non-exempt employees are governed by the Fair Labour Standards Act (FLSA). There is a standard minimum wage set by federal and state laws, and employers must compliantly pay their employees according to the law. There are different minimum wages for exempt and non-exempt employees, and while employers can pay their employees higher paychecks, they can’t pay less.
When an employer chooses to reduce the amount from the employee’s paycheck either because of poor performance or unplanned leaves, it is called pay docking. Defined by the state and federal government laws, pay docking applies to exempt employees. But one must know the circumstances under which pay docking is permissible.
Although exempt employees are not entitled to the laws of overtime payment, under FLSA rules and employment laws, employees must at least be paid the amount of $684 per week. Fair deductions from the amount under the law are permissible, but employers may not make improper deductions that are not in compliance with the FLSA rules and also their organization’s policy.
What are permissible pay docking?
Salary deductions of exempt employees are allowed only under certain circumstances. Managers make mistakes in FLSA rules. To help better understand these permissible pay docking conditions, here are some points to consider:
- Employers can deduct salary from exempt employees when the employee is absent for 1 or more full days consecutively. Some employers might choose not to deduct salary for pre-informed personal leaves, but otherwise, employers have the right to deduct costs on full-day leaves for personal reasons.
- Some organizations may have paid sick leave plans for the employees or the number of days they can take paid sick leave. According to the law, pay docking is permissible for a full day’s leave because of sickness.
- Penalties for safety violations of the company and imposing significant risks to fellow colleagues. Under such circumstances, pay docking is permissible.
- Intentional mistakes and misconduct on the organizational level such as leakage of information, and significant intentional losses for the company, are all eligible scenarios for pay docking.
- Unpaid leaves are taken under the Family and Medical Act.
- If the employee doesn’t work the full week, especially during the first and last week of joining.
Pay docking rules are more complicated than standard FLSA minimum wage laws. There are frequent updates and many laws that fall into the act. Staying compliant with these laws is advisable for all managements staffs, including the HR department and payroll departments.
What is partial pay docking?
Generally, partial pay docking is an unlawful act. For instance, if an employee has urgent work for a few hours during the day, pay docking is not permissible. Pay docking is only allowed for full-day absences.
Final Words
Apart from the complications of the federal laws and state laws, which are different in each state, there is also the company policy itself which recalls the rules and regulations for pay docking within the organization. It is critically important to stay compliant and aware of your company policies as well as state and federal laws.
