Do you know the rules for docking employee pay for exempt and nonexempt workers? There can be some gray area and it's important to understand what's permissible by law. This presentation walks you through what you need to know.

1. Docking
Employee Pay
Know the Rules for
Salary Deduction

2. What are the rules for
reducing employee pay?

3. First, you must know the difference between an
exempt and a nonexempt employee.

4. Department of Labor Fair Labor Standards Act.
Exempt
Generally, these are your
salaried workers. They are not
covered by the Fair Labor
Standards Act (FLSA).

5. Nonexempt
These workers are protected by
the FLSA, which specifies
minimum wage and
overtime rules.
They are required by law to be
paid the minimum wage for all
hours worked.

6. Docking Exempt Employee Pay

7. Exempt employees are protected from docked pay because
they are not covered under overtime or minimum wage rules.

8. But that’s not always the case.

9. Permissible Salary Deductions for Exempt
Employees
• When no work is performed for a workweek.
• When absent for a day or longer not related to an accident or sickness.
• If a penalty is being imposed for a violation of company policy.
• Unpaid suspension for breaking a conduct rule.
• If the employee only works a partial week when starting or finishing employment.

10. Before you make any
decision on whether to
dock the pay of an exempt
employee, it is essential
to determine if the salary
deduction is permissible
by law.

11. Docking Pay for Nonexempt Employees

12. Nonexempt employees
are required by law to be
paid the minimum wage
for all hours worked.
They must also be paid
overtime if they work
more than 40 hours in a
workweek.

13. Are you allowed to dock
nonexempt employee pay?

14. Most employers shy away
from doing so.
However there are cases in
which you are allowed to
dock pay to penalize a
worker for violating a
particular policy.

15. Note: An employer
cannot refuse to pay
a nonexempt worker
for any hours that the
person has worked.

16. If a nonexempt employee is absent from work or misses the
entire workday, you are permitted to dock his or her pay for the
hours missed.
However, you are required to do so based on the normal
operating hours of your business as well as the company’s
attendance policy.
Permissible Cases Where You can Dock Pay for a
Nonexempt Worker

17. With all this in mind, the FLSA does not
prohibit employers from cutting a worker’s
hourly wage as a punishment.

18. As long as the nonexempt
worker is paid the minimum
wage, the employer is allowed
to dock pay by reducing the
hourly wage.
But employers are not allowed
to hold back payment for
hours that have already been
worked.

19. Note: Employers are not
permitted to dock the
pay of a minimum wage
worker who has violated
a company policy.

20. There is a lot of gray area when it comes to docking pay for
nonexempt employees.

21. Before doing this, an employer must make sure they
know the ins and outs of the Fair Labor Standards Act,
ensuring that they do not break the law when
adjusting the pay of the worker.

22. Looking for more
small business tips?
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