Deductions from Exempt Employee Pay for Vacation?

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Question

We have an exempt employee who is taking a few days off for vacation, but the employee has no paid time off (PTO) left. Can we deduct full-day absences from the employee’s weekly salary? What about partial-day absences?

Answer

In general, an employer must pay an exempt employee the full weekly salary if the employee performs any work during the workweek. An employer does not need to pay an employee for any workweek during which he or she performs no work (for example, if an employee takes vacation for an entire workweek). This general rule is commonly referred to as the “salary basis rule.”

There are several exceptions to the salary basis rule, including for vacation. The U.S. Department of Labor’s Fact Sheet #17G explains that an employer may make deductions from pay when an exempt employee is absent for one or more full days for personal reasons other than sickness or disability (for example, vacation). In contrast, partial-day deductions generally violate the salary basis rule, except if they occur in the first or last week of employment or for unpaid leave under the Family and Medical Leave Act. For example, if an exempt employee misses work for one and one-half days for vacation, the employer may only deduct for the full-day absence; the employer must pay the exempt employee a full day's pay for the partial day worked.

The rules above pertain to deductions from an exempt employee’s pay. Note that different rules apply for deductions from an exempt employee’s PTO balance. If an employer’s policy gives employees PTO for personal absences such as vacation, then deductions from an exempt employee's accrued PTO account (in any amount, including partial days) to cover an absence under the policy do not violate the salary basis rule. The U.S. Department of Labor’s Fair Labor Standards Act (FLSA) Overtime Security Advisor contains detailed information on these and other rules. 

 

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Published Date:June 20, 2022

Categories: HR Question of the Month