Can I Dock an Exempt Worker for Missing Work?

Here’s the scenario, my staff accountant (an exempt worker under the FLSA Administrative Exemption) has an attendance problem.  He’s used up all of his vacation and sick time and continues to miss work.  Can I dock his pay for the time he’s missed?

Well, like all good questions, the answer is – maybe.  Let’s start with the ground rules.  Here’s what the DOL says.

“Being paid on a “salary basis” means an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis.  The predetermined amount cannot be reduced because of variations in the quality or quantity of the employee’s work.  Subject to exceptions listed below, an exempt employee must receive the full salary for any week in which the employee performs any work, regardless of the number of days or hours worked.”

So, if he works any time in that week, he needs to be paid for that week – the full week.  But, there are some exceptions.  Here’s what the DOL says on that (with emphasis added by me):

“Deductions from pay are permissible when an exempt employee: is absent from work for one or more full days for personal reasons other than sickness or disability; 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 (you can reduce their pay because you are instead paying them sick time); for penalties imposed in good faith for infractions of safety rules of major significance; or for unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions.  Also, an employer is not required to pay the full salary in the initial or terminal week of employment, or for weeks in which an exempt employee takes unpaid leave under the Family and Medical Leave Act.”

As usual, the DOL does a good job of explaining things in a manner that doesn’t always answer the question and then leaves it up to the courts to clarify. So, here’s a summary of do’s and don’ts.

1 – Don’t ever reduce an exempt employee’s pay by less than a full day.

2 – If you have established plans for sick and vacation pay, you can allow an exempt employee to use vacation or sick time in half-day increments, but if they run out, don’t dock them for missing time. You can discipline them, but don’t reduce their pay.

3 – Before you elect to suspend an exempt employee without pay, make sure that reason is significant.  If you want to suspend them because you want them to have time to “think about if they want to continue to work for your organization”, then make it a paid suspension.

Now, I can hear you thinking, “What’s the risk”.  The risk is that if the DOL’s Wage and Hour Division finds out what you’re doing (i.e. docking an exempt employee’s time for using too much sick time) you run the risk of losing that exemption.  That employee now becomes hourly and you owe him any overtime he works in the future, and possibly in the past two years.  Also, all other employees in that category could be reclassified as nonexempt and you have the same overtime penalties.   That whole issue could also get the DOL to audit all of your exempt employees and they might find other jobs that you’ve classified as Exempt but they rule are nonexempt. Let me tell you, you don’t want the DOL mad at you.

So, establish an effective attendance policy, and discipline all employees consistently based on their attendance – but don’t reduce the pay of an exempt employee.  Typically if someone is missing too much work, then they are not getting their work done and you can clearly fire them for that.

A Word About Vacations

Summertime – and the livin’ is easy. Well not as easy as it should be. The economy is still struggling. The unemployment rate is not rebounding like it should be. Gas still costs way too much. Maybe the livin’ isn’t easy at all – but it is still vacation season. Having just returned from my first extended vacation in years, I have a renewed perspective (and that vacation aura) that paid vacations are a wonderful thing.

Does your organization offer paid time off? Most do, according to the DOL. There are no requirements (that I am aware of) in any state or the federal regulations requiring paid vacation time. Similarly, paid vacation time is not required to be treated at “hours worked” for calculating overtime. Given all that, the DOL’s March, 2009 Benefits Survey says that 75% of civilian workers (86% of Full Time workers and 36% of Part Time workers) have access to paid vacation time. Slightly fewer small companies offer vacation – 69% for companies with less than 50 employees.  Elementary and Secondary schools showed the lowest percentage (24%) but that does not account for summers off for most teachers. Hospitals had the highest percentage at 91%.

The number of days off varies widely, but the averages (median) are very consistent – 10 days after 1 year, 15 days after 5 years, and 20 days after 20 years. I was surprised to see no significant variation between union and non-union organizations. Part Time workers tend to get around half (or slightly more) time off of what full time workers get.

So, everybody does it, but why? I can give you three good reasons.

1)  Paid vacations allow employees to decompress – to get away from work, spend time with families and friends, and avoid burn out. Vacations allow employee time for recreation – meaning to re-create. Time to heal one’s self and recharge your batteries.

2)  Paid vacations are (for the most part) a non-incremental cost. If you budget paying Sally $40,000 to do her job, you don’t pay her anymore to take vacation. And (especially for exempt employees) you don’t have to pay someone else to do her job while she’s out. Most likely she’ll work harder before and after the vacation to get ready and then to get caught up. For some jobs you may have to backfill the positions while they’re off, so this reason isn’t universal, but it is very common.

3)  Paid vacations allow you to audit the work of the vacationing employee. If someone is doing something they shouldn’t be doing it will often be exposed with someone else does their work for a few weeks. When I worked in banking years ago, people who handled money were required to take a 2 week vacation every year for that exact purpose.

So, I strongly encourage management to find a way to offer all employees some amount of paid time off. There are lots of strategies to allow employees to accrue or earn that time – different “rules” about how the time can be used – ways to make sure people don’t abuse the system.  Don’t make it too complicated and be prepared to pay employees for any earned but unused balance when they terminate (it’s required in most states).

Enjoy the coming summer – and make sure to take a few days off. I’m sure you deserve it.

Let’s Have a Party!

I bet you didn’t even know that today is a holiday – it’s not on the Hallmark calendar and the Post Office is open.  Today is National Employee Benefits Day – as proclaimed by the International Foundation of Employee Benefits Plans.  Have a party, eat some cake, and thank your local benefits professional.

Benefits are a challenging area for HR.  They can be expensive, but some are legally required and some are demanded if you want to be competitive in the labor market.  A solid benefit program also should improve employee satisfaction and loyalty, thereby reduce turnover.

Benefits can be expensive.  There are more benefits than ever to manage: Health and welfare benefits (medical, dental, vision and life insurance); Income Continuation Benefits (short and long term disability, unemployment, and workers’ compensation); Retirement Benefits (401k, pensions, and ESOPs), and Employee Assistance Plans.  All of these benefits have a direct cost to the organization that typically ranges from 5-15% of payroll depending on how the organization shares costs with employees. 

Time off benefits (holidays, vacation, sick time, bereavement pay, jury duty, and voting time) are also in the mix and must be administered. While most of these are non-incremental costs (if I was going to pay Susie $30,000 per year to do her job, I don’t have to pay more when she’s on vacation, I just don’t get any work done) they still have a value that typically runs between 10% and 25% of payroll.  Don’t forget payroll taxes, which while not really an “employee benefit” still cost the company 7-10% of payroll.

You can also throw some less traditional benefits into the mix like cancer insurance, long term care, accident protection (aka Aflac),and prepaid legal.  Then add in paid parking, a company cafeteria, discounted bus passes, wellness programs, an onsite medical clinic, and discounts to area venues and health clubs.  Don’t forget tuition reimbursement, adoption assistance, employee discounts on merchandise, and maybe a summer picnic and a winter holiday party.

The role of a benefits manager is often much more diverse than simply coordinating an annual open enrollment meeting. A comprehensive benefit package can easily cost upwards of 35% of payroll and can be both a competitive advantage, and liability.  A good manager should be working constantly to assess the effectiveness of your benefits plans – are they meeting the needs of both the employees and the organization?

So, buy your benefits manager a cake today and have a party – but keep it short because they’ve got a lot of work to do.

Bereavement Leave – A Sad Fact of Business Life

The question comes up – how much time can I take off to attend the funeral of my (fill in the blank)?  It’s a tough question.  People die – it’s one of the few universal facts of life. Those deaths occasionally affect our employees – sometimes directly, sometimes tangentially.  Assuming you already provide some form of paid time off benefit for your employees, should you provide a separate amount of paid time off for to a death in family?

The answer is probably yes.  According to SHRM, 90% of companies offer some amount of paid bereavement leave.  The most common practice seems to be 3 days for an immediate family member and 1 day for an extended family member.  The definitions between these two get muddled sometimes.  The leave is really intended to provide time to make arrangements, attend the funeral and maybe provide for some out of town travel.  Pretty much this can be almost cut and dried.

But can you really deal with the loss of an immediate family member in 3 days?  If your spouse or child should die on Tuesday, can I expect you back at work the following Monday?  Surely that can’t be practical.

I know, everyone grieves in different ways. Sometimes 3 days is plenty.  If a parent has been living in a care facility for years then maybe you’ve had time to prepare (emotionally and administratively) and only a few days are required.  On the flips side, the unexpected death of a spouse or child can be devastating.  No way is 3 days going to cover it.

Back to the corporate perspective.  As a business person I have to do something.  I recognize the impact a death can have on my employees, but I have a business to run.  I can’t afford to pay someone for 2-3 weeks of time off every time a great-aunt dies.  Some employees seem to lose an aunt or uncle every few weeks.  What am I supposed to do?

Be compassionate.  The 1-3 day leave is sufficient for most situations.  Allow employees to use other forms of PTO if they need more time.  In the case of an unexpected death of a family member allow for unpaid leave.  Give your supervisors some discretion, and know that occasionally you will be taken advantage of.  While bereavement leave is one f the most commonly offered forms of PTO, it is typically one of the least frequently used.

Keep your rules simple, help employees appreciate the value of helping the company be successful, and be compassionate.

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Snow Day – Weather and Attendance

There are some real advantages to working from home. On days like today with 4-6” of snow falling and the TV traffic people droning on about road conditions, I just pad on upstairs, boot up my laptop and get to work. My heart goes out to all of you stuck in traffic right now. But, as so often happens in my stream-of-consciousness world, this started me thinking about the “good old days” of being the HR manager who had to deal with all the employees who couldn’t get to work today because of the weather. Does your company have a “Weather” policy? If not, you probably should. Here’s the issue, if an employee can’t get to work on time due to adverse weather conditions, should you penalize them in some fashion – e.g. dock their pay, count that as an “event” in your attendance tracking, etc.? What if they decide not to come to work at all? What if they have to stay home with children because school (and daycare) is closed? Is it different for Exempt employees? What about employees who can work from home? What happens if you decide to close the office mid-day due to the weather – do you pay employees for the rest of the day if you send them home? What about those who never made it in? Again, what about those who can go home and then work from there? Like all tough HR questions, the answer is– it depends. Like all good “policies” this one needs a large dose of discretion. Here’s my advice: If an employee is late to work due to inclement weather such that others are also late, I suggest you note the occurrence, discuss it, but not count it as a “tardy” for attendance purposes. For nonexempt employees I do not encourage you to pay them for the missed time. If someone elects to simply stay home for their personal safety or to care for others, they may use PTO or unpaid time and, again, I would probably not count this as an event in your attendance tracking. But, if one person claims weather issues and 50 others got to work on time, then you may need to use some different discretion. If you choose to close the office and send everyone home this also would not be an attendance event. I lean toward paying all employees who get sent home for the remainder of the day but this can be an equity issue if some employees can (and are expected to) work from home while others can’t or won’t. Again, discretion is advised. If an employee chose not to come to work, and then you close the office, I don’t recommend paying that employee in the same manner as you might pay those are sent home. But again, it gets confused if they work from home. If a nonexempt employee works – whether at the office or at home – and you are aware that they are working – you are required to pay them. That takes me to a whole other issue of nonexempt employees working from home – with and without permission – but we’ll save that for another day. The bottom line here is this is a chance for you to show some understanding and use your discretion. Don’t punish employees because of bad weather, but let them punish you either. Build relationships where everyone considers the needs of both the employees and the business and you’ll be able to “weather the storm”. (Sorry – that was just too easy.)

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