Many employers mistakenly believe they can dock pay from salaried, exempt employees for arriving late or leaving early. However, under the Fair Labor Standards Act (FLSA), this practice is usually illegal and can result in costly penalties.
Key Points of the FLSA:
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The FLSA divides employees into two main categories: exempt and non-exempt.
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Non-exempt employees are typically paid hourly and must receive overtime pay (time and a half) for any hours worked over 40 in a week. In some states, like California, overtime also applies to hours worked beyond eight in a day.
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Exempt employees are paid a fixed salary, regardless of how many hours they work in a week. To qualify as exempt, employees must meet certain criteria, including a minimum salary threshold (currently $684 per week or $35,568 annually) and specific job duties.
Common Employer Mistake: Docking Exempt Employee Pay
If an exempt employee shows up late, leaves early, or even works just a few minutes in a day, the employer cannot legally reduce their pay for that day. This is often referred to as the "touch-the-wall" rule: if the employee performs any work during the day, they must be paid their full salary for that day.
Employers are allowed to:
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Discipline or terminate employees for attendance issues.
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Dock paid time off (PTO) banks for partial-day absences.
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Dock pay only in very limited circumstances, such as full-day absences when all PTO is exhausted, or for unpaid leave under the Family Medical Leave Act (FMLA).
Who Qualifies as Exempt?
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Managers: Must supervise at least two employees, have management as a primary duty, and shave ignificant input on hiring/firing decisions.
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Professionals: Includes doctors, lawyers, accountants, and others with advanced degrees or significant professional discretion.
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Administrative Professionals: Must have a substantial impact on business operations, work independently, and make important decisions.
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Outside Sales: Employees who primarily work outside the office, making sales.
Simply giving someone a "manager" title or paying a salary does not automatically make them exempt. The actual job duties and authority matter.
Consequences of Getting It Wrong
Violating these rules can lead to significant back pay, overtime liability, and legal fees. Employers who improperly dock exempt employee pay may inadvertently reclassify them as non-exempt, triggering overtime obligations retroactively.
Bottom Line
Before docking pay from a salaried, exempt employee, consult with HR or an employment attorney. It is almost always safer—and legally required—to pay the full salary for any week in which exempt employees perform any work, regardless of hours worked.