For those of you with employees who are exempt from the overtime provisions of the Fair Labor Standards Act, you know you generally have to pay their salaries on a weekly basis. If an exempt employee works just a few minutes in any given week, you have to pay his or her entire salary for the week unless a specific exception applies. Two exceptions potentially cover those situations in which an exempt employee is out sick.
First, an employer is not required to pay the full salary for weeks in which an exempt employee takes unpaid leave under the Family and Medical Leave Act. Rather, when an exempt employee takes unpaid leave under the Family and Medical Leave Act, an employer may pay a proportionate part of the full salary for time actually worked. Note three important things — this exception allows deductions for both full days and partial days; it only applies to those employers covered by the Family and Medical Leave Act; and it only applies to those employees eligible for Family and Medical Leave Act leave.
There is a second exception out there — you can deduct from an exempt employee’s pay for absences of one or more full days (not partial days) if the deduction is made pursuant to a “bona fide plan, policy or practice of providing compensation for loss of salary” due to sickness or disability under 29 CFR 541.602(b)(2). In other words, an 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 also can be made a) before the employee qualifies for the plan and b) after the employee has exhausted the benefits under the plan. “Salary replacement plans, policies and practices” can include short term disability plans and workers’ compensation benefits made under state law. Some PTO plans may even meet this standard if they provide a reasonable amount of paid sick leave and are not designed to evade the requirements of the Fair Labor Standards Act. So, a PTO plan that only provides exempt employees a few days of paid time off for sick leave each year probably won’t be considered a “bona fide plan, policy or practice.”
As always, be very careful about docking an exempt employee’s pay. If you think an exception to the general rule applies, be conservative — if there is any reasonable doubt in your mind about it, play it safe and don’t dock the person’s pay.