Employment Law Tip for Illinois Employers #3 Salary Deductions for Absences – Part 1

The Fair Labor Standards Act (“FLSA”) dictates how and when employers can make deductions from their employees’ pay.  Of course, there are differences when you are dealing with an exempt versus a non-exempt employee.  For the purposes of this blog entry, we will only discuss deductions made to the salaries of exempt employees.

Section 13(a)(1) of the FLSA provides an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, professional and outside sales employees and certain computer employees. To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis of more than $455 per week. Exempt status is not determined by job title; an employee’s specific job duties and salary must meet all the requirements of the Department of Labor’s regulations. 

As discussed in my first blog containing the 1st tip for Illinois employers, there are restrictions and regulations regarding when and how an employer can deduct from employee’s pay when it comes to damaged or lost equipment. Employers need to be aware that there are additional restrictions regarding deductions, specifically those when an employee misses time from work for illness, vacation or personal reasons.

Deductions from pay are permissible when an exempt employee is 1) absent from work for one or more full days for personal reasons other than sickness or disability; 2) for absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness; 3)  to offset amounts employees receive as jury or witness fees, or for military pay; for penalties imposed in good faith for infractions of safety rules of major significance; 4) or for unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions.

Oftentimes employers are unclear whether they can deduct from an exempt employees pay if they are absent from work   When an employee misses a full day or more of work due to personal reasons, there is no issue with an employer deducting pay from the employee’s salary for that time missed.  Keep in mind, employers must ensure that time is accurately documented pertaining to an employee’s use of vacation/personal time pursuant to the employer’s policy; where an employee has available paid time off (“PTO”)(including vacation or personal time), those days missed should be deducted first from that employee’s available PTO.  Also, an employer is permitted to deduct from time missed for any reason (including illness) if that employee has not yet qualified for participation in the employer’s PTO plan.  Although there is no bright line rule regarding timing to qualify for an employer’s sick/vacation leave plan, the Department of Labor has found a one year probationary period to be reasonable.  For further reference see, http://www.dol.gov/whd/opinion/FLSA/2006/2006_09_14_32_FLSA.htm

If an employer has a bona fide plan, policy or practice of providing defined sick days to its employees, that has been communicated to eligible employees and the employee has exhausted all of the sick days available under that bona fide plan, policy or practice, it is permissible for an employer to deduct from that employees salary for a full day missed from work due to illness or disability.  If an employer does not have a bona fide plan, policy or practice of providing its employees with paid sick days, then it is not permissible for the employer to deduct from an exempt employees salary for time missed due to illness or disability.  Of course, oftentimes there are issues determining whether an employer’s policy will be considered “bona fide”.   Stay tuned for my next blog regarding what constitutes a bona fide plan, policy or practice and the ramifications of non-compliance with the above discussed regulation of the FLSA.

There are many issues to consider when determining whether or not you can deduct from an exempt employees salary for missing work.  For more information on this topic or questions regarding any further employment related matters, please contact Dana Perminas, at 312-334-3474 or dperminas@messerstrickler.com for more information.