Subscribe to Inc. magazine
HUMAN RESOURCES

The Employment Law You Are Probably Breaking

How you pay your employees is governed by federal law. Violating it is easy, so be careful.
Advertisement

Dear Evil HR Lady,

 If an exempt employee had to go to the doctor and missed an hour to three hours of work, can an employer dock pay? For example, a pregnant employee had an appointment and missed two hours of work. Can I dock her for two hours?

Regardless of the circumstance, can an employer dock a couple of hours of pay at all for any reason?

--Wondering manager

 

Dear Wondering,

I probably get at a variation of this question at least once a week: It's a very common conundrum for employers. The short answer is no. Docking pay from an exempt employee is illegal.

There is a law titled the Fair Labor Standards Act (we HR types refer to it as FLSA). If an employee is subject to this law (non-exempt), when they reach more than 40 hours in a given work week, they have to be paid at time and a half for any additional hours. If they are not subject to the law (exempt), they aren't eligible for overtime, but there are other rules that come with, like no docking pay.

This means that no matter how much it annoys you, if you have an exempt employee who takes off two hours early to do anything--doctor's appointment, soccer tournament, just plain bored and wanted to go home--you cannot dock her pay. It's helpful to think of this in terms of a "touch the wall" rule. That is, if your employee shows up for work, even if it's just for 15 minutes, you must pay for the entire day. (In the case of remote workers, if they so much as log onto their computers, call on one customer, or do any anything work related, that counts as touching the wall.)

You can discipline, fire, demote, yell at, or dock vacation time. But, you may not dock pay. And if you do dock pay? You've just made that person non-exempt. Which means you not only owe overtime going forward, you owe it going backwards. So your attempt to save $50 by docking two hours pay, could mean you'll be out thousands in back overtime pay.

Now, not only do I see pay docking violations all the time, I see violations where people are labeled exempt when they really should be non-exempt. And it's not necessarily easy to tell where people should be. If it's not abundantly clear to you, categorize someone as non-exempt and pay by the hour.

What makes this extra complicated is that the FLSA hasn't been adequately updated to reflect today's knowledge workforce. Here are some general guidelines for determining exempt status. Consult the FLSA website for specific questions.

In order to be considered an exempt employee, employees have to meet several qualifications. They must be paid a minimum of $23,600 per year, receive an identical paycheck each week (bonuses and commissions can be added on top of this, but you can't pay someone less), and perform "exempt" job duties. For instance:

Manager: If they supervise two or more employees, and managing these people is a big part of the job description, and have hire/fire authority (or at least strong input) over these people, they count under a manager exemption. Just slapping a "manager" title on someone does not make them exempt. If, for instance, if the bulk of a shift manager's job is to help customers, stock shelves, keep the store tidy, and run a cash register, but this person is also responsible for seeing that the other employees get their daily breaks, the person should be classified as non-exempt, and eligible for overtime.

Professional: Some of these are easy to classify. Doctors, registered nurses (but not other nursing staff), lawyers, accountants (but not accounts payable/receivable people), and almost everyone making more than $100,000 per year are considered exempt. People who have considerable professional discretion are also exempt. That is, an analyst who works independently can be exempt. Most creative workers are also considered exempt professional staff.

Administrative Professionals: This sounds awfully similar to "admin" roles, which are decidedly non-exempt. These are really people who have a big impact on the business, work independently and make decisions on their own. The person who organizes your schedule, answers your phone, and orders office supplies does not count under this exemption. These are people who work in things like finance, HR, quality assurance, IT (although IT has its own exceptions), public relations, and other things that keep the business going but don't necessarily manage others.

Outside Sales: These people call on customers and make sales. If they are sitting inside your office making phone calls, they are considered inside sales and are non-exempt.

Pretty much everyone else needs to be paid by the hour. Which means, that if your accounts payable clerk checks her email at home, she needs to record that time on her time sheet and be paid for it. It also means that even if you don't authorize overtime, if the employee works it, you must pay him. You can fire him after paying it, but you must pay.

Have a problem employee or a people management question? Send your questions to EvilHRLady@gmail.com.

Last updated: Apr 5, 2013

SUZANNE LUCAS | Columnist

Suzanne Lucas spent 10 years in corporate human resources, where she hired, fired, managed the numbers, and double-checked with the lawyers.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



Register on Inc.com today to get full access to:
All articles  |  Magazine archives | Livestream events | Comments
EMAIL
PASSWORD
EMAIL
FIRST NAME
LAST NAME
EMAIL
PASSWORD

Or sign up using: