Leave Deductions for Exempt Employees

I would like to know if there is a regulation regarding Exempt Employees use of Leave Time. When an Exempt Employees takes off part of a day, we would like to charge those hours to Leave Time, but still pay the employee the same salary. If the Exempt Employee does not have any Leave Time left, employee would still receive their salary.

We set up job numbers. Some of the numbers are for overhead work. We have a job number for General Office Work, Promotional Work, Leave Time Used, Holiday, and Extra Salary Time Off.

Example: Exempt employee works every day M-TR 8 hours, then works 4 hours Friday. We would put the other 4 hours against his Leave time.

Can we do this without jeopardizing his Exempt Status?

Thanks!

Comments

  • 27 Comments sorted by Votes Date Added
  • Short answer is sure! Side note: If you have a bonafide practice of substituting leave time for partial days absences, then once the leave bucket is empty you do not have to continue full salary. You would only pay for time worked until sufficient leave time is restored.
  • Are you sure? I thought once they used up their leave time, as long as they worked in that week, they had to be paid for the full week.
  • If the employer has a bona-fide policy requiring that leave time be used for partial days, you may pay for partial days when the leave bank is dry...... I've been down this road numerous times with DOL in 3 different states and the same rule applies. If you don't have an established practice of doing this, then reducing the pay (once the leave bank is empty) will likely be a problem, so it's a matter of how you wish to handle it, the size of your org, etc....... It's hard to comprehend why an employer would substitute leave time for partial days and once the leave bank is empty return to paying a full days pay. Now there's some misdirected incentive.
  • Middle, I've read several US DOL Opinion letters on this very subject -- charging accrued leave time of an exempt employee for partial day's absence -- and while it is permitted under DOL interpretation of FLSA (accrued time is not seen as compensation but as a fringe benefit), I've never seen any Opinion letter allowing the practice you cite:

    "If you have a bona fide practice of substituting leave time for partial days absences, then once the leave bucket is empty you do not have to continue full salary. You would only pay for time worked until sufficient leave time is restored."

    In fact, the US DOL has made it very clear in those Opinion letters that if the employee is out of the appropriate paid accrued time with which to charge for the partial day's absence, the employer MUST still pay the full salary for the day if the employee has worked any part of that week.
  • Can you tell me where the DOL Opinion Letter you cited can be found. I'd like to have some backup. Most of our long time Exempt Employees have way too much leave time available and of course only take off an hour or two (rarely full days) then they have an overabundance of leave still available.
  • My understanding is the same as Hatchet's. I've known employers to have used 'Middle's' theory; but have never known the DOL to find it a legal practice. Nothing I have read on the subject, including on the Forum supports that practice either. (Where is 'Texas Twister Theresa' or 'Missouri Miller' or 'Miz Williams'?
  • I agree with Hatchet too. I have been over this road many times, many seminars and the answer has always come back that with a bonafide plan, you can replace time away with leave bank time, but when the bank runs out, you still pay full days. The key has always been to make sure that you are still paying the same thing, no matter what you internally call it. If an exempt employee runs out of leave time, then you must decide if this qualifies as disciplinary action under an absence policy. That is what we did, we still paid, but began a verbal, written, and automatic termination procedure for unexcused, unpaid time off.
  • B/4 I search for the legal opinion and my notes from prior DOL audits, I'm hoping one of our esteemed legal guru's can comment on our "difference of opinion". While we all tend to rely on our own personal experiences and "dance with the girl that brung you", we all have different musical tastes........ Paging an experienced Conductor !!!!
  • They 'pop up' when the question relates to 'flowers or flags in the office' or 'opinions' about what might be discrimination. This one is pretty cut and dried so maybe one of them WILL give us the answer. It's also well known that ALL attorneys take the entire months of June and July off! (That should bring one of them out.)

  • I was told during a recent audit that, although the practice of partial-day deductions is not permitted for exempt employees under the FLSA, it's something they rarely go after. The auditor said that even the DOL feels employers should not be required to pay employees for not working.

    The practice itself is not illegal, but rather will threaten the exempt status of those in the position thereby opening you up to back pay for any O/T worked in last 2-3 years.

    It also is an issue proposed for revision in the new regs currently under review.


  • I just had a meeting w/our labor counsel and asked him about this issue. He said my understanding was correct and that while this practice was not illegal (not a FLSA violation), it could offer a minute risk if all other exempt staff were not be treated the same. Since we treat all exempt staff the same way (with this issue), he believed our risk was nil. I'm in Illinois and the IL DOL has adopted the common notion of no work, no pay for this particular issue. I know that Calif looks at this issue entirely differently, so I should've prefaced my initial comments with my location. Sorry if that confused anyone. As Christinet said,,,,,,,,the issue may go away with the new reg's..............
  • But I'm not wanting to deduct for partial days off......I'm only wanting to use available leave time up. The pay would still be the same, but they would actually be decreasing their available leave. Could we make a policy that Exempt Employees must charge time off to Leave time in two hour increments?
  • jmcaa: My recommendation to you would be: "to leave the issue of time off and time off for EXEMPTS" to the chain of command. If one of my managers and his/her chain of command approves a request for payment and cash in time awarded for vacation time accured, we pay it, and manually denote the utilization of time awarded and owed. The computer does not pile up vacation time or compensatory time off for EXEMPTS, it is an manual process. We in HR do not get involved nor concern ourselves with the comings and goings of EXEMPT employees. HR is better able to deal with more important issues. We make sure the EXEMPT status is protected by staying clear of the chain of authorities' responsibility to manage their people and their problems. We make sure each exempt knows where and when they used their vacation time,or when they cashed in their vacation time, we do not and will not try to know when they may have compensatory time off or on!

    My 30+ years in HR has been very successful by staying out of those issues that are not important for me to be concerned; this is one that is brought on by "busy bodies" or "payroll clerk" who has not received my very clear guidance. Time clocks/time keeping are for the non-exempt, who are protected by Federal Law and need our HR attention to keep the company and the labor force from going UNION! I keep management informed of the Federal and State Laws and advise my partners on how to command but I do not take their place.

    I hope this wisdom will help you and others! PORK
  • Thank you for your thoughts, but I am on the HR Committee and one of the items we are charged with is changing our Leave Time for all employees. We accrue leave time due on our financial statements monthly. This amount can be very large when exempt employees leave work early or take off a couple of hours but are never able to charge it to leave time unless they don't work for the WHOLE day.

    My question is still unanswered. Is there a DOL Opinion, etc. which would stop us from charging part of their time off to leave time, without making any deductions from their pay.

    Exempt works 5 hours one day, charges the 5 hours to a job number, we want to charge the other 3 hours to leave time.

    Thank you all for your input. It is appreciated!
  • jmcaa: The issue before your committee is mis-placed? EXEMPT AND NON-EXEMPT time are not compatiable. The EXEMPT ee is owned by the company for 25 hours a day and 8 days aweek. The need for the exempt employee's personal time to be devoted to the need of the organization, the company, the corporate body is never going to be applicaple to the rules sanctioned by the Federal Government and some states for the payment of money for the use of the non-exempts personal time in life. The organization rents the non-exempt's time and pays the individual in the form of casth for hours worked, benefits (vacation time being one), and overtime.

    The repayment of the EXEMPT'S personal time is, likewise, included in the vacation benefit; but the extra hours spent by the EXEMPT ee's personal time is paid back with company graditude, promotions, challenges, special projects, special recognition for a job well done, etc,etc.

    Trying to charge an EXEMPT employee for an hour here and an hour there can not be done, it is not compatible, unless you are also going to make provisions for front pay of the "minute here or hour there" or the time I spend nightly with the mental gears running to find the answer to a company issue, or the nights I'm called out to investigate and vehicle accident, or answer the alarm for the facility that has an errant fire alarm buzzing, or the time that the police find the door crashed in from vandals. Or how about the night that my wife and I had to spend entertaining at our expense guest of the company because it was our time, not our choice, but "our time".

    Come on, GET THE ISSUE OUT OF COMMITTEE, IT IS MIS PLACED! Give it back to the mis-informed, negative attitude, busy body clerk, that thinks we are equal! It ain't so!!! 32 years I've been in this world of EXEMPT HRs, and your committee goal is oriented toward the socialist view of the world of work; we are equal and and all must be equally treated. Turn that issue in and draw another to spend good time upon! Pork
  • The answer to your question is that there is no federal law addressing the issue of whether or not an employer should/could charge an employee's time off to a leave bank. Nor is there a state law in most states, none that I know of. It is an employer's option to set up a policy of having a leave bank or leave banks of several types and it is the employers decision as to whether to have a policy requiring that certain types of absences be charged to those available leave banks. Also, I know of no state regulations that address how much of the day must be missed before it is chargeable to a leave bank. Some employers have 'by the hour' leave banks and some have half day minimums and most have whole day minimums. The choice seems to be yours (or the company's).
  • Thank you Don D for answering my question.
  • jmcaa: I understand fully what you are trying to do. Yes. Go ahead and use the leave bank for partial days. We were at the full-day policy for a couple of years are it hurt both our employees and our firm. I researched the opinions and yes you can do it. Just don't start cutting wages on exempt employees.
  • >I would like to know if there is a regulation regarding Exempt
    >Employees use of Leave Time. When an Exempt Employees takes off part
    >of a day, we would like to charge those hours to Leave Time, but still
    >pay the employee the same salary. If the Exempt Employee does not have
    >any Leave Time left, employee would still receive their salary.
    >
    >We set up job numbers. Some of the numbers are for overhead work. We
    >have a job number for General Office Work, Promotional Work, Leave
    >Time Used, Holiday, and Extra Salary Time Off.
    >
    >Example: Exempt employee works every day M-TR 8 hours, then works 4
    >hours Friday. We would put the other 4 hours against his Leave time.
    >
    >Can we do this without jeopardizing his Exempt Status?
    >
    >Thanks!

    jmcaa: Sorry, but I still disagree and "Dandy Don", did not answer your question, there is most certainly Federal Law and I recommend you consider it clearly, under the "PART 541" DEFINATIONS AND TERMS FOR EXEMPTS>...

    My comments were provided in good faith that you wanted to ensure there were no laws... there is as stated above. Again, I would recommend that you consider your example, as stated fits your design for a predetermined outcome. I am an EXEMPT ee, who reports to work every day M-F and sometimes on Sat/Sun. My hours are dictated by me, but under your example, I can only count my working hours from 8-5 with a one hour lunch break for your employee bank. When in fact, I am here daily from 7:00 AM or earlier last week on two days due to an accident, with a 30 minute lunch break, which was 15 minutes yesterday because I had an ee who needed me for a HR question. Tuesday of this week the President of the company was here for his weekly visit. Our discussion went until after 6:00 PM. My lunch breaks are normally 30 minutes or less in our kitchen! Yesterday, my company car was in trouble, I had to take it to the company garage for them to work on it; we were there until after 7:30. The mechanic was marking time as I helped him work on the car. As you can see, you can not compare my hours worked for the company with those of the President or the clerks who were long since gone after work at 5 PM and who's hours did not start until the majic hour of 8:00AM.

    Now, when you set up your bank there must be a means, if you want equality and to treat the EXEMPT ee's hours the same, you must be prepared to also give me credit for the hours over 40 provided to the company as loyality given to the company in good faith. Oh, and these banking hours need to also compute these banking O/T hours as 1 1/2 times,when I exceed 40 on Wed or Thursday. Our computer program "for hours worked" also accounts for our NON-EXEMPT overtime hours worked in banking hours earned for vacation pay and FMLA computations.

    Enough said on this subject, I still do not recommend your action to attempt equal banking unless, you have a means of given EXEMPT ee credit for additional hours worked beyond the 40 hour work week or beyond the 8 hours per day! The hours banked under your example are not comparable!

    PORK


  • Pork: This is a rhetorical question, but, are you sure you want to post that?
  • "Dandy Don": Already did! As you can tell I'm still the same old Pork, that has been there and done that, treating EXEMPTS as equal in any comparsion to NON-EXEMPT HOURS is mis-placed guidance!!! May you also have a great and blessed day! Pork
  • >"Dandy Don": Already did! As you can tell I'm still the same old Pork,
    >that has been there and done that, treating EXEMPTS as equal in any
    >comparsion to NON-EXEMPT HOURS is mis-placed guidance!!! May you also
    >have a great and blessed day! Pork


    Pork: If you are suggesting that I recommended (quoting you) "treating EXEMPTS as equal in any comparison to NON-EXEMPT HOURS is misplaced guidance!!!", I must say I don't know where your medication is, but please take it! I will say to you again that there is no federal law, or in YOUR case, Mississippi law, addressing an employer's right to establish or not establish a practice and policy of leave banks or the taking of time from a leave balance, or in what increments leave banks may be charged for hours missed. If you will go back and read the original question, you will see that it has nothing at all to do with your notions about treating exempts and non-exempts alike and has nothing to do with how many hours people work or when people come in and leave for the day. We're talking about federal and state law here. We are not talking about reducing one's pay or docking one's pay. The question was one of law and federal law as well as the laws of your state are silent in regard to an employer's right to grant and monitor sick leave, vacation, personal leave and annual leave. If you will check with your local Employment Security Office, you will find that they also charge sick and vacation leaves by the hour with both exempts and non-exempts, as do a variety of employers throughout your state. When that is done, the pay does not vary; however, the accounting column to which the pay is charged does. What's for lunch? x:-)
  • "Dandy Don": I can not believe how much company time you are making this old HR soldier spend on this issue trying to make you and many other young HR people know, and understand that while this is a great medium for dialogue it is not the end all to end all in research. If you will go back to several moons ago, the original posting, jmcaa wanted to know of Federal Law and/or State law that could become involved in the development of a policy/program/benefit "whatever" you want to call it! If you stretch the question far enough you can get to A NEED TO UNDERSTAND EXEMPT VERSES NONEXEMPT and how they are different and they how they are equal. My advice still stands, moneyman understands where I am coming from, as long as the company keeps "40 hours a week" on the front burner and the same is true for both the EXEMPT AND THE NON-EXEMPT, then you are right and moneyman is also right.

    A HR committee can be very dangerous, when they are put into the policy making or benefit business without a strong and knowing HR advisor or business attorney also involved from the get go! Been there and done that, the posting as written would not work in our company, and in our state, we do not hold the line on 40 hour work weeks. Until I got here the non-exempt ee was allowed to sell his/her vacation hours and was forced to receive a pay out for sick time. The EXEMPT just simply lost it or used it, catch as catch can, and when they left the company, we paid out whatever sick time and vacation time the EXEMPT said we owed. We do pay out sick time to NON-EXEMPTS, every year because it is recorded in the payroll computer program. We do not pay out sick time to the EXEMPT because we do not keep records of minutes and hours worked NOR MINUTES AND HOURS OFF DURING WORKING TIME DAY OR NIGHT, IT DOES NOT MATTER TO US!. We do keep manual and paper record of EXEMPT VACATION TIME AWARDED AND USED, BY THE WEEKS AND DAYS USED. The accounting manager has been gone for two days and I just found out today. Does it matter to HR, or the bank that she and the General Manager / President owner? Heck no, unless there is an FMLA issue that might arise from her absences. JMCAA, good luck with your bank, I still advise you to understand there is very interesting dialogue on-going here and take it or leave it. "Dandy Don" see you at the funeral of "Ole Reb"! Now back to work, so I can bank some real work hours for my company, ya'll eat more pork out there, now.

    PORK
  • [font size="1" color="#FF0000"]LAST EDITED ON 06-19-03 AT 08:33AM (CST)[/font][p]I think that jmcaa can pursue these plans, IF they suit the company practices and structure, but I would not do an hour for hour accounting. Our company instituted a rule that the exempt were charged in only 4 or 8 hours for time away during the normal scheduled day. Now, this only works for us because, we encourage our exempts to ONLY work 40 hours a week (or whatever they "contracted" for upon hire). Our structure lends itself to contain people within those guidelines. Just as we don't want hourly working overtime, we don't want exempt working more (partly due to finances and partly due to employee morale/stress). For example, if an exempt stays late for a meeting (1-2 hours) they are encouraged to leave a little early somewhere else during the week. If an exempt SCHEDULES time away for sick or personal reasons, then they must use their PTO bank in either 4 or 8 hour increments. This also gives the employee the sense of knowing that because they put in a little extra over time, then can schedule that doctors appointment in the afternoon without any consequences. They tried to do it hour for hour, and the complaint was just as you said, exempts all knew that they did put in some extra time somewhere and felt it unfair to be hit with every hour away during the normal day. They in turn did not feel like if was fair to get paid for a whole day when they came in for 2 hours then went home sick. We discussed it among exempt employees and found that the compromise of the 4 or 8 hours was acceptable to all. Like I said, we do not encourage anyone staying extra, so this system works for us. It is rare when an employee must come in over the weekend, or be told to stay late for a special meeting, mostly it is the employee themself that just wants to finish a project/thought process before cleaning up to go home.

    It has been working for us, we feel that we are still in compliance with the regulations for exempts, and we feel that there is not an abuse of this policy.
  • moneyman: Thanks, Your company did consider the issues based on law and went ahead with a Banking system that fits your company character/philosophy. Your efforts to compel EXEMPT 'ees to go home before they record 41 hours allows for equal comparsions and equal benefit actions with the same 40 hours recorded with the non-EXEMPTS. MY EXTACT POINT! Pork
  • The extra four hours on the Friday should be counted as sick,vacation etc. This does not effect the Exempt status.
  • JMCAA: I'm out of here! PORK
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