Compensation &; Payroll
Docking Pay as a Form of Discipline
Q: Under the FLSA, may I dock an employee's pay as a disciplinary penalty?
A: Although it is discouraged by many experts, employers may in some circumstances dock pay to penalize an employee for violating a written policy.
While an employer cannot refuse to pay a nonexempt worker for hours that the employee has worked, the Fair Labor Standards Act (FLSA) does not prohibit employers from reducing a nonexempt worker's hourly wage rate as a disciplinary action. Nonexempt employees only have to be paid the minimum wage.
Therefore, unless there is a union contract or other employment agreement that provides otherwise, under federal law employers are entitled to reduce pay of nonexempt workers, as long as the workers still are paid the minimum wage. Employers may not dock the pay of a minimum-wage earner for violating a policy or committing a safety infraction.
Exempt employees usually are paid salaries, and any reduction to those salaries must comply with the FLSA regulations, or the employees' exempt status will be jeopardized. Under 29 C.F.R. 541.602, deductions from exempt employees' pay can be taken for disciplinary suspensions, but they must be made on a full-day basis only. In addition, the suspension must be imposed as a result of a serious violation of workplace conduct rules, such as engaging in dangerous behavior in the workplace or committing sexual harassment. The Department of Labor excludes suspensions related to performance issues and poor attendance from the definition of “violations of workplace conduct rules.” Finally, the suspension must be part of a “written policy applicable to all employees.”
Courts interpreting the FLSA rules, however, also have ruled that if an employer routinely makes salary deductions of less than a full week for disciplinary reasons or has an employment policy that creates a significant likelihood of such deductions, the salary requirement is not satisfied and the employee is not exempt from the FLSA (Auer v. Robbins, 519 U.S. 452 (1997)).
Article by Ruhal Dooley, SPHR, is an HR knowledge advisor in SHRM's Information Center from http://www.shrm.org/kc/solutions/articles/archives/CMS_021739.asp#P-8_0