Deducting from exempt employee pto bank

We currently have a time keeping policy that requires exempt employees to log hours worked (yes, this was approved by our labor attorney). Since implementing this policy many employees have become disgruntled when expected to deduct hours from their PTO bank for taking a day off or partial day off when they have actually worked in excess of 40 hours throughout the week. This is, of course, no surprise.

First, is it legal to deduct from a PTO bank when an exempt employee has already worked 40 hours. Second, any recommendations on how to abolish such an absurd policy?


  • 3 Comments sorted by Votes Date Added
  •  It is totallly legal to have exempt employees follow a timekeeping
    system and it does NOT jeopardize their exempt status, so I agree with
    your labor attorney.  Here's jsut one quote "The DOL recently issued an opinion letter in
    response to an inquiry about whether timekeeping requirements for
    exempt employees violated the salary basis test. The DOL reaffirmed its
    position that timekeeping requirements for exempt employees do not
    affect an employee's exempt status. Accordingly, employers may require
    that exempt employees clock in and out at the beginning and end of the
    day and at breaks or keep accurate time sheets of the time worked each

    there are no laws requiring PTO at all, generally how it is paid out is
    dependent on company policy.  Some states do have laws of payout
    on termination. So if the employer doesn't allow for "makeup" time,
    then yes, they can legally deduct from PTO for time missed during
    work/office/required hours.  Exempts are paid by the job, not by
    40 hours.  If they take time off from that job, then yes, PTO
    could be deducted for that time even if it is over 40 hours. Is it best
    practice? No, I don't think it is.  But it is up to the policy the
    company has set.  

    If you are in California, the
    courts/state DOL there have gone back and forth on whether exempts
    could have PTO deducted in increments less than 1/2 day or 4
    hours.   As of right now, I think the standing is that yes,
    you can deduct from PTO, but if an exempt runs out, you still have to
    pay them unless they take a whole day off for personal reasons.

    the company is realizing that even if the exempt uses all PTO, they
    still have to be paid their full salary in any week in which they work
    except for some very specific exemptions:(1) sick after using up a
    bonafide plan (2) personal reasons, (3) FMLA usage (4) first or last
    week or a few others.  I don't have the link here, but I can post
    it if need be.

     The reason above would be one argument. Another would be
    if an employee uses up all PTO when they are already working extra
    time, when do they get down time? to vacation? to destress? 
    Morale will definitely decrease.  Employees will learn to work
    around the system.  You will burn employees out. They will have
    more medical issues, possibly more workers compensation issues. 
    You will lose employees due to this burnout. Your turnover will go up
    and your retention will go down. Now I know there are some businesses
    and industries that just don't care about such things because they have
    constant sources of new qualified hires.  But turnover cost is
    huge and hurts the bottom line.  You need to show how this policy hurts the bottom line.  How it affects the company financially.  Otherwise it just turns into another whine about an "unfair" policy.


  • This is excellent feedback. The morale issue is what really hits home. We are a seven-day-a-week operation and working extended hours is the norm. The argument I get is that "most companies expect a 55+ workweek therefore employees should expect to use PTO".

    Thank you for this information.

  • I would agree with HRforME, and build on the <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />California argument.  IMO, I normally recommend that Exempt EE only take time in 1/2 days, shift, or full day increments.  Avoiding any reference to hourly increments is a safe practice, as you do not want to jeopardize your exemption classifications.  This was a topic a few years ago in the legal section of the SHRM conference, around the time they updated the FLSA guidelines.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />

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