What deductions are allowed under the "salary basis" rule? The salary basis rule states that an exempt employee must regularly receive, each pay period and on a weekly or less frequent basis, a “predetermined amount” of compensation that cannot be reduced because of variations in the quality or quantity of work performed. By that language, are any deductions allowed?
But for a few identified exceptions, the exempt employee must receive the full salary for any week in which the employee performs any work, regardless of the number of days or hours worked. However, exempt employees need not be paid for any workweek when they perform no work.
In a BLR webinar titled "Wage/Hour: How to Avoid Enforcement Landmines and Devastating Class-Action Lawsuits" Laura E. Innes, Esq., led a section titled "Employee Classification Conundrums and Timekeeping Troubles: How to Avoid Scrutiny With Bona Fide Practices." In that section, Innes outlined what deductions are actually allowed.
Deductions are allowed for certain types of absences are for “one or more full days.” This means a deduction may be taken from the salary under this language only in full-day increments. Deductions for partial-day absences violate the salary basis rule generally, except those occurring in the first or final week of someone’s employment or for unpaid leave taken under the Family and Medical Leave Act. So, for example, if an employee is absent for one and a half days to handle personal affairs, the employer may only deduct for the one full-day absence. The employee must receive a full day’s pay for the partial day worked to meet the salary basis rule. Other examples of improper deductions include: a deduction of a day of pay because the employer was closed due to inclement weather; a deduction of three days of pay because the employee was absent from work for jury duty; and a deduction for a two day absence due to a minor illness when the employer does not provide wage replacement benefits for such absences.
Laura E. Innes, Esq. is a shareholder in the law firm of Simpson, Garrity, Innes & Jacuzzi specializing in labor and employment law consulting and litigation for employers. (www.sgilaw.com) Her practice spans the San Francisco Bay Area region and includes work for construction companies, high-tech companies and other major corporations in the areas of employment policies and contracts, wage/hour law, discrimination prevention and investigation, affirmative action, workplace safety and management/union relations. Before entering private practice, Innes served as a compliance officer with the federal Department of Labor, as an HR manager with the Mission Neighborhood Health Center in San Francisco, and has also acted as an administrative prosecutor for the California Department of Fair Employment and Housing. Innes has been interviewed for Forbes' in-flight audio programming on United and American Airlines regarding the trends in wage and hour litigation.
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