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Deductions
In addition to meeting certain duties tests, to qualify for exemption under
the Regulations, Part 541, generally an employee must be paid at a rate of not
less than $455 per week on a salary basis. As a general rule, if the exempt
employee performs any work during the workweek, he or she must be paid the full
salary amount. An employer may not make deductions from an exempt employee's pay
for absences caused by the employer or by the operating requirements of the
business. If the exempt employee is ready, willing and able to work, an employer
cannot make deductions from the exempt employee's pay when no work is available.
To qualify for exemption, employees generally must meet certain tests
regarding their job duties and meet certain compensation requirements. Job
titles do not determine exempt status. You should also review the other sections
of this Advisor for help in determining whether the employee meets the duties
tests for exemption.
Are any deductions allowed?
What kinds of deductions are not allowed?
What is the effect of isolated or inadvertent improper deductions?
What if the improper deductions are not isolated or inadvertent?
How do you distinguish between isolated or inadvertent improper
deductions and an actual practice of making improper deductions?
What if the employer does not reimburse the employee for the deductions?
Are any deductions allowed?
Deductions from pay 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.
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What kinds of deductions are not allowed?
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.
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What is the effect of isolated or inadvertent improper deductions?
Improper deductions that are either isolated or inadvertent will not violate
the salary basis rule for any employees whose pay had been subject to the
improper deductions, provided that the employer reimburses the employees for the
improper deductions.
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What if the improper deductions are not isolated or inadvertent?
If an employer has an actual practice of making improper deductions from
employees' pay (as opposed to isolated or inadvertent improper deductions), the
salary basis rule will not be met during the time period in which the improper
deductions were made for employees in the same job classification working for
the same manager(s) responsible for the actual improper deductions. Therefore,
the affected employees will not have been paid on a salary basis as required for exemption during that time period.
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How do you distinguish between isolated or inadvertent improper deductions
and an actual practice of making improper deductions?
An actual practice of making improper deductions demonstrates that the
employer did not intend to pay employees on a salary basis. The factors to
consider when determining whether an employer has an actual practice of making
improper deductions include, but are not limited to:
- The number of improper deductions, particularly as compared to the
number of employee infractions warranting discipline;
- The time period during which the employer made improper deductions;
- The number and geographic location of employees whose salary was
improperly reduced;
- The number and geographic location of managers responsible for taking
the improper deductions; and
- Whether the employer has a clearly communicated policy permitting or
prohibiting improper deductions.
If an employer has a clearly communicated policy that prohibits the improper
pay deductions that includes a complaint mechanism, reimburses employees for any
improper deductions and makes a good faith commitment to comply in the future,
the salary basis of pay will not be violated unless the employer willfully
violates the policy by continuing to make improper deductions after receiving
employee complaints.
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What if the employer does not reimburse the employee for the deductions?
If the facts show that the employer has an actual practice of making improper
deductions and the employer fails to reimburse employees for any improper deductions or
continues to make improper deductions after receiving employee complaints, the
salary basis rule is not met and the exemption is lost during the time period
in which the improper deductions were made for employees in the same job
classification working for the same manager(s) responsible for the actual improper
deductions.
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Compensation Requirements
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