Handling half days off: Exempt vs. Nonexempt

by GoCo - 19 July 2017 - Benefits, HR, Talent Management

What do you do when an employee wants a half-day off? You are probably thinking to yourself “That has got to be the dumbest question Haberman has ever asked.” In reality it is not quite as straight forward as you think, because you have two classes of employees, exempt and nonexempt, that have different answers. How you handle half days off for exempt employees is different than how you handle it for nonexempt employees.

With nonexempt employees it is easy. According to the FLSA they only have to be paid when they work, so they may take partial unpaid vacation days any time an employer authorizes the time. But it is not so easy with exempt level employees and how you handle it may run you afoul of the Fair Labor Standards Act. Basically in the private sector employers that make deductions from exempt employees’ pay for absences of less than a day may jeopardize their exempt status under the FLSA. This may expose the employer to liability for any overtime worked by the employees.

Let’s review. Exempt employees are exempt from the FLSA’s minimum wage and overtime requirements because of the nature of their job duties and the fact that they are paid on a salary basis. The term “salary basis” is defined by the FLSA regulations as the payment on a weekly or less frequent basis of a predetermined amount that constitutes all or part of compensation, without reductions for variations in the quality or quantity of the work performed. Under this definition, exempt employees generally must receive their full salary for any week in which they perform work, without regard to the number of days or hours worked.

Generally if the exempt employee has paid vacation available you can require them to use paid vacation for partial day absences. This may safeguard the exempt status since this does not reduce the employee’s compensation. The Department of Labor (DOL) generally has considered this type of arrangement permissible. In the comments to the current regulations the DOL specifically restates this position acknowledging that employers may make deductions from exempt employee leave accounts without jeopardizing the employee’s exempt status. Several courts have adopted this position, although a few have disagreed. Those that disagree have determined that this practice, even without an actual loss of pay, treats the exempt employee like an hourly, nonexempt employee and, therefore, triggers loss of the exempt status. So you need to understand the state law where your business resides.

If an exempt employee has taken all their vacation or other paid time off the FLSA regulations do allow docking of exempt employees for full day absences taken when the employee has exhausted paid leave. Specifically, deductions are allowed for absences from work of one or more full days for personal reasons, unless those days are for sickness or disability. As an example, if the employee is absent for two full days to handle personal matters, those two days may be deducted from the employee’s salary without having an effect on the exemption. If you have a bona fide plan, policy, or practice that provides compensation for loss of salary as a result of sickness or disability you may make deductions for a full day’s absence due to illness or injury. But if you had no such plan you cannot make these deductions.

According to the FLSA regulations:

29 CFR 541.602(b)(2):

(2) Deductions from pay may be made for absences of one or more full days occasioned by sickness or disability (including work-related accidents) if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for loss of salary occasioned by such sickness or disability. The employer is not required to pay any portion of the employee’s salary for full-day absences for which the employee receives compensation under the plan, policy or practice. Deductions for such full-day absences also may be made before the employee has qualified under the plan, policy or practice, and after the employee has exhausted the leave allowance thereunder. Thus, for example, if an employer maintains a short-term disability insurance plan providing salary replacement for 12 weeks starting on the fourth day of absence, the employer may make deductions from pay for the three days of absence before the employee qualifies for benefits under the plan; for the twelve weeks in which the employee receives salary replacement benefits under the plan; and for absences after the employee has exhausted the 12 weeks of salary replacement benefits. Similarly, an employer may make deductions from pay for absences of one or more full days if salary replacement benefits are provided under a State disability insurance law or under a State workers’ compensation law.

There is however, a simple solution to problem of exempt employees taking half days off. JUST LET THEM DO IT. Generally they are working more than 40 hours a week anyway. (If not, then you have another issue perhaps.) So if they need an occasional afternoon or morning off give it to them. After all, you are most interested in their productivity not their attendance. Or at least you should be.

This article is by Michael Haberman from omegahrsolutions.com.

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