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Exempt Employees and Partial Day Absences
You know that you cannot dock your exempt employees’ pay for
absences of less than a day. But can you require them to use paid leave
for this time off? Just as importantly, should you? |
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THIS
WEEK’S E-TIP: Exempt Employees and Partial Day Absences
One issue that comes up continually for employers is how to deal
with
exempt employees who take time off in less than full day
increments.
The Fair Labor Standards Act (FLSA) regulations make it clear
that
employers generally cannot dock their exempt employees pay for
absences of less than a day without jeopardizing the exemption.
(Download
free Hours of Work model policy including HR best practices
and legal background .)
But, a question arises when employers have policies requiring
exempt
employees to use hours of paid vacation or sick time for partial
day
absences. These policies provide a way for employers to attempt
to
avoid docking pay since the exempt employee’s salary remains the
same.
This approach can raise questions, though, about whether the
employee
is really being paid on a “salary basis,” as required by the
FLSA’s
regulations. Some courts and the DOL disagree about how the
requirement affects the employee’s exempt status. And, from an
employee relations’ perspective, the requirement can create ill
will from
exempt employees who consistently work more than 40 hours a week
without additional compensation.
* DOL Allows Use of Paid Time Off for Partial Days *
The DOL, in its opinion letters, traditionally has permitted
vacation or sick
leave offsets as long as the exempt employee does not experience
a
reduction in compensation. So, according to the DOL, once an
employee is out of paid-time off, you may not make any partial
day
deductions. In the comments to the 2004 regulations, the agency
specifically restates its prior position outlined in the opinion
letters.
Several courts have adopted the DOL’s position. For example, in
Webster v. Pub. Sch. Emples. of Wash., Inc., 247 F.3d 910 (9th
Cir.
2001), the Ninth Circuit determined that an employer can make
deductions for partial day absences from an exempt employee’s
leave
bank. According to the court, leave time is not considered
salary, even
when the leave can be paid out as cash at termination.
Similarly, in
Schaefer v. Ind. Mich. Power Co., 358 F.3d 394 (6th Cir. 2004),
the court
acknowledged that exempt status is affected only by monetary
deductions for work absences and not by non-monetary deductions
from
fringe benefits such as personal or sick time. |
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* Some Courts, States Disagree *
However, a few courts have disagreed. They have determined that this
practice, even without an actual loss of pay, treats the exempt employee
like an hourly, nonexempt employee and, therefore, triggers loss of the
exempt status.
For example, in Klein v. Rush-Presbyterian-St. Luke’s Med. Ctr., 990
F.2d 279 (7th Cir. 1993), the Seventh Circuit determined that a private
employer improperly categorized employees as “professional.” The
employer had established a compensatory time “bank” based on
overtime hours from which employees had to draw when working less
than eight hours per day. The court ruled against the employer even
though the employees never were actually docked if their banks had a
negative balance.
In addition, some state laws may impose different requirements for
docking leave banks. For example, Washington employers may make
deductions from leave banks in partial day increments (but for at least
one hour) only on the express or implied request of the exempt
employee for time off from work.
As a result of this disagreement between the courts and the DOL, and
since state laws may vary, employers still will be caught in the middle
on
this issue. Accordingly, if you are a private employer and require
exempt
employees to use paid leave for absences of less than a day, you should
consult legal counsel.
(Note that special rules apply for exempt public employees and allow
them to be considered exempt even if their pay is reduced for partial
day
absences as the result of a pay system that meets certain requirements.
These rules are discussed in the FLSA regulations at 29 C.F.R.
§541.710.)
* Consider Employee Reactions, Workloads Before Setting Policy *
As a practical matter, though, even if you are in a jurisdiction that
allows
use of paid leave for partial day absences, you may find that exempt
employees resent being required to do so, particularly if they regularly
work more than 40 hours per week. In this situation, they are not
entitled
to additional pay when they put in long hours, but are required to use
vacation or sick leave if they need a few hours off.
(Download
free Hours of Work model policy including HR best practices
and legal background .)
If your concern is that your exempt employees may abuse their status by
leaving work early or coming in late, address those issues as a separate
matter. For example, discipline exempt employees who do not complete
their work or who are not available when needed. In other words, do not
penalize all your exempt employees just because of the possible abuses
of a few. |
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Subscribers to the
Personnel Policy
Manual System and HR Policy Answers on
CD can find information on FLSA exemptions in Hours of Work,
Chapter 207, notes 24 through 30, and on the FLSA and the salary
basis
test for exempts in Hours of Work, Chapter 207, note 32..
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