Disciplining exempt employees by docking pay will endanger the exemption.
As you might guess the very simple answer is “yes”, but going about this can causes many problems for employers. After all there is a prohibition against deducting from an exempt employee’s salary. If you do this incorrectly you may alter the exemption and make the employee eligible for overtime, which probably not the effect you wanted to have.
Simple discipline
Attendance and tardiness is still a big issue for many employers, especially the tardiness issue. I personally think this is misguided but that is the subject of another discussion. I have had a number of clients tell me they are tired of the employee being late and wonder what they can do something about it like dock their pay. Naturally my question is “Are they exempt or non-exempt?”
If they are a non-exempt employee the issue is a bit easier. You can dock a non-exempt hourly employee’s wages for hours not worked. You cannot however dock their pay as a punitive measure in excess of the time they are absent or late. Typically companies will have a minimum increment of time they use to determine if someone is early or late. So if someone is late within that short period of time no deduction should be made. You can ultimately punish them by suspending them for repeated rules violation, but the FLSA does say you must pay for all time worked.
Salaried EXEMPT employees are another issue. The terms of being an exempt employee mean they get their full pay check regardless of the time worked or the quantity or quality of work performed. You cannot dock their pay as a punitive measure. If you have an employee who is consistently an hour late each day, so be it. You can counsel them and explain the importance of being there on time. You can even fire them, but, ultimately you cannot reduce their pay for that time not worked.
Focus on productivity
The trade-off for being an exempt employee is that you may have to work hours well beyond the typical 40 workweek, in exchange for not losing money on the days you don’t put in a full day. The focus needs to be on productivity and not time. If someone is not putting in enough time to get their work done you fire them for lack of productivity not for the time element. There are allowable deductions that can be made from an exempt employee’s salary. You can find those seven reasons in this blog post The Seven Reasons You Can Dock an Exempt Employee.
In this list you will notice reason #5, which reads “Unpaid disciplinary suspension of one or more full days imposed in good faith for violations of written workplace conduct rules.” You may think “Well that is how I can punish tardiness.” Unfortunately courts have not sided with such decisions. They have not considered tardiness, unless really out of control, to be of a severe enough nature to warrant that action. As I said above focus on the productivity of the employee and measure them on what they produce. If they are not meeting those standards then it becomes a much easier issue to discipline or terminate someone.
Photo credit: David Castillo Dominici