Riddle me (you) this:  A salaried employee has worked for your company for just two weeks. He gets sick and misses one full day of work.  He has accrued a small number of hours in his leave bank but not enough to cover the whole day.  Are you obligated to pay the employee for the full day missed?

The simple answer is yes, you must pay an exempt employee for the full day.  DO NOT make partial day deductions from that employee’s (or any exempt employee’s) salary due to not having enough leave to cover the absence.  Under the FLSA, the general rule is that an exempt employee – one qualifying for the classification under the statute – who performs any work during the workweek must be paid the full salary amount for that week without regard to the number of days or hours worked.  Under the FLSA, if this calculation is done improperly, you could lose the salaried classification for that employee.

Now, there are some exceptions to this rule.  Those exceptions are outlined in the regulations, which are at 29 CFR 541.602(b), and some permit deductions from a salaried employee’s pay without losing the salaried classification for that employee.  Still, it’s obviously extremely important for employers to try and get this situation right the first time.      

A related issue under the FLSA is how to manage the situation when salaried, exempt employees are taking off time and attributing it to sick and vacation leave.  The general rule is that an employer is allowed to substitute or reduce accrued leave in a bona fide benefits plan for the time an employee is absent from work even if it is less than a full day.  This can be done without affecting the salary classification so long as the employee still receives an amount equal to the employee’s guaranteed salary.

The major difference in how the exception for vacation versus sick leave absences are treated is that sick leave deductions must be done in accordance with a bona fide plan, policy or practice of providing compensation for loss of salary due to sickness or disability.  By allowing deductions only in accordance with a bona fide policy, plan or practice, the regulations require an employer to provide some type of wage replacement benefits for absences related to sickness or disability.  What this means is that if an employer does not have a sick leave policy, it cannot deduct time from the salaried employee’s pay for full day absences due to sickness or disability. 

On the other hand, employers are not required to provide vacation to employees.  If a salaried employee is absent from work for a full day or more for personal reasons, not including illness or disability, the employer may make deductions to the employee’s salary without fear of losing salaried status for that employee.  If the employer does have a vacation policy, it can require the salaried employee to reduce accrued leave balance by the amount of time the individual is not physically in the office for personal reasons not related to disability or sickness. 

Employers must remember that the law in this area only allows deductions to be made based on full day absences in instances where there is no vacation policy for the employee to reply upon.  If a salaried employee takes off one day and a half for personal reasons, and there is no vacation policy in place, then the employer can only deduct for the one full day absence.  If there is a vacation policy in place then it is permissible to require the salaried employee to use the full day and a half of vacation time for the absence.    

As most employers know, the FLSA is a very dense statute that requires a number of checks and balances.  For this reason, and others, it’s often best to seek legal counsel when considering action affected by this statute, whether related to leave deductions and pay, or otherwise.

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