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October 07, 2010
What Can You Deduct from Exempt Employees’ Pay?

Cheryl Orr and Heather Sager discuss exempt employee deductions in a BLR webinar entitled ‘Wage Payments: What You Can and Can’t Legally Deduct from Employees’ Pay’. They provide the following information about what an employer can legally deduct from exempt employees’ pay.

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Making improper deductions from an employee’s pay can expose a company to a huge liability and risk. Resolving the matter can also result in high settlements. Also, federal and state agencies are getting more aggressive in pursuing wage and hour deductions than such agencies have been in the past. Penalties for failing to properly deduct items from employees’ pays can go directly to the federal and state agencies that pursue offending companies. When can an employer deduct from exempt employees’ pay? Deductions can occur for certain circumstances. These include the following:

  • Partial day absences: Employers may make deductions form exempt employees’ vacation banks for partial day absences. However, monies cannot be removed from the exempt employees’ salary or pay.
  • Furloughs: There may be occasions when the employer may declare days in which employees cannot work because the company is shut down e.g. between Christmas and New Year. If an exempt worker works for a day in that week, they must receive their pay
  • Reduced work schedules: This is similar to the furlough case. However, there may be no definite return to the full work week
  • Late arrival/early departure: No deductions are permitted from the exempt employees’ pay
  • Sickness: No deductions are deducted for sick days, unless the employer has a sick leave program. In that case, deductions can be made in from the employees’ accrued sick leave
  • Workers’ compensation: Full day deductions can be made if a worker is receiving worker’s compensation benefits
  • Jury duty/Witness leave: This is similar to furloughs, if the employee is absent for a full week
  • Military leave: This is similar to furloughs, if the employee is absent for a full week
  • Disciplinary deduction: No pay can be deducted. However, employees can be put on leave without pay

Impermissible deductions place exempt classification at risk. Also, employers can pay exempt employees extra for extra work without risk.

Cheryl D. Orr, Esq. is a partner and co-chair of the national Labor and Employment Practice Group at Drinker Biddle & Reath LLP (www.drinkerbiddle.com). Heather M. Sager, Esq. is also a partner in the Labor and Employment Practice Group at Drinker Biddle & Reath LLP. Sager focuses her practice on management-side representation in collective and class actions, with particular experience in wage and hour litigation under state and federal law.

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