More Time Off? Tricky Pay Decisions

Vacation Issue: Partial Days for Exempt Employees Q&A

Nonexempt employees only have to be paid when they work, so they may take partial unpaid vacation days any time an employer authorizes the time. But what about exempt employees? Find out how the FLSA exemption regulations limit unpaid time off of less than a day for these employees.

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Q: We sometimes allow nonexempt employees to take half-days off, even if they do not have any paid vacation time available if they have personal business to attend to. We now have several exempt employees who have requested to take off half days this summer for personal reasons. Can we allow them to take these partial days off, even if they do not have any paid vacation available to use?

A: Since nonexempt employees only have to be paid for time actually worked, employers have greater flexibility in providing them with unpaid time off for absences of less than a day. Accordingly, you have the discretion to have a policy that allows nonexempt employees to take unpaid time off.

With exempt employees, however, the issue is a little trickier. You can allow them to take the time off, but if an exempt employee does not have any paid time off available, you should not dock his pay. Private employers that make deductions from exempt employees' pay for absences of less than a day may jeopardize their exempt status under the Fair Labor Standards Act (FLSA) and thus become liable for any overtime worked by the employees.

(Download a free Vacations model policy including HR best practices and legal background.)

Exempt employees are exempt from the FLSA’s minimum wage and overtime requirements because of the nature of their job duties and the fact that they are paid on a salary basis.

The most common exempt classifications include executive, administrative, and professional employees, outside sales employees, highly-skilled computer-related employees, and highly compensated employees. The term “salary basis” is defined by the FLSA regulations as the payment on a weekly or less frequent basis of a predetermined amount that constitutes all or part of compensation, without reductions for variations in the quality or quantity of the work performed.

Under this definition, exempt employees generally must receive their full salary for any week in which they perform work, without regard to the number of days or hours worked.

The FLSA regulations do allow docking of exempt employees for full day absences taken for vacation when the employee has exhausted vacation leave. Specifically, deductions are allowed for absences from work of one or more full days for personal reasons--other than sickness or disability.

So, for example, if the employee is absent for two full days to handle personal affairs, those two days may be deducted from the employee's salary without affecting the exemption. (You also may make deductions for a full day's absence due to illness or injury if you have a bona fide plan, policy, or practice that provides compensation for loss of salary as a result of sickness or disability.)

However, the FLSA regulations specifically prohibit employers from docking the pay of exempt employees for absences of less than a day, except as allowed under the Family and Medical Leave Act (FMLA). The FMLA allows employers to make deductions from an exempt employee's salary for FMLA leave without affecting the employee's exempt status, even for partial day absences.

If the exempt employee has paid vacation available, you may be able to safeguard the exempt status and avoid docking pay by requiring exempt employees to use paid vacation for partial day absences.

Since this does not reduce the employee's compensation, the Department of Labor (DOL) generally has considered this type of arrangement permissible. In the comments to the current regulations (implemented in 2004) the DOL specifically restates this position acknowledging that employers may make deductions from exempt employee leave accounts without jeopardizing the employee's exempt status. Several courts have adopted the DOL's position, although a few have disagreed. Those that disagree 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.

In addition, a few 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.

Clearly, then, you should not dock exempt employees for partial day absences if they do not have any paid leave available. And, as a practical matter, even if you operate in a jurisdiction that permits the practice of requiring exempt employees to use paid vacation for partial day absences, you may find that exempt employees resent this requirement, particularly if they regularly work more than 40 hours per week.

(Download a free Vacations model policy including HR best practices and legal background.)

As an alternative, you may consider allowing exempt employees who regularly work more than 40 hours a week to take partial day absences, without docking their salary or vacation, in recognition of their long hours and as long as their schedules are not adversely affected (i.e., they do not miss their deadlines or important meetings). Most exempt employees will appreciate your flexibility, and you can deal with any exempt employees who abuse your policy on an individual basis.

Regards,

Robin Thomas, J.D.
Personnel Policy Service, Inc.

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