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HR MATTERS E-TIPS
THIS WEEK'S E-TIP: Exempt Employee Disciplinary Suspensions
Published by Personnel Policy Service, Inc.
"Your Policy and Compliance Experts Since 1972"
 
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THIS WEEK'S E-TIP: Exempt Employee Disciplinary Suspensions

FLSA regulations now allow you to suspend exempt employees for
misconduct, without pay, for absences of less than a week. But, be
careful – the regulations also impose very specific requirements you
must meet before taking this action.
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THIS WEEK'S E-TIP: Exempt Employee Disciplinary Suspensions

The Department of Labor (DOL) exemption regulations that took effect
last August created a new, lawful deduction that allows you to suspend
exempt employees without pay for full day absences without jeopardizing
their exempt status.

Previously, employers were only allowed to dock exempt employee pay
for "penalties imposed in good faith for safety rules of major
significance." However, this old exception to the salary basis test is so
limited (applying to such safety infractions as smoking in oil refineries)
that most employers do not have grounds to impose this deduction
legally.

The new DOL provision now gives you the right to use unpaid
suspensions, in limited circumstances, to discipline exempt employees.
To take advantage of this suspension, though, you must be sure certain
policies are in place, or risk big penalties.

* The Salary Basis Test *

According to the DOL's wage and hour regulations, an employee is
considered to be exempt if he meets certain job duty criteria and is paid
on a "salary basis." An employee is considered to be paid on a salary
basis if his pay is not subject to reduction because of variations in the
quality or quantity of the work performed. Thus, an exempt employee
must receive the full salary for any week he performs any work
regardless of the number of days or hours worked.
[ez/tpl/inc/free-access.htm]

Note that a few exceptions can apply, such as certain full-day absences
related to personal time off and illness under a sick leave plan. In
addition, the FLSA regulations include two disciplinary situations where
employers may make deductions from an exempt employee's pay, as
discussed below.

* Safety Rules of Major Significance *

The employee's salaried status is not affected by "penalties imposed in
good faith for infractions of safety rules of major significance." This
allowable deduction is the one referenced above and remains
unchanged in the current rule.

"Safety rules of major significance" are those relating to the prevention of
serious danger to the workplace or other employees, such as rules
prohibiting smoking in explosives factories, oil refineries, and coal mines.
According to the DOL's comments to the final regulations, deductions
made for this reason may be in partial day increments. However,
because of its very limited application, most employers still cannot use
this deduction.

* Conduct Rule Violations *

Under the recent FLSA revisions, an exempt employee now can be
suspended without pay for one or more full days as disciplinary action
imposed in good faith for workplace conduct rule infractions. This
disciplinary deduction provision was added in the new regulations.
Previously, you could not suspend exempt employees without pay unless
you suspended them for an entire week.

To use this deduction, you must have a written policy that is applied to all
employees. (The DOL comments to the final rule indicate that just
because the policy must cover all employees it does not preclude an
employer from making case-by case disciplinary determinations.) Note,
too, that the comments to the final rule point out that the term "workplace
conduct" covers just inappropriate conduct, including harassment,
violence, drug or alcohol violations, or violations of state or federal
laws, but does not cover performance or attendance issues.

Your policy does not have to include an exhaustive list of specific
violations that could result in a suspension, or even a "definitive
declaration" of when a suspension would be imposed. Rather, the
written policy only has to be sufficient to put employees on notice that
they could be subject to an unpaid disciplinary suspension.

 
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* Improper Deductions Can Cost You *

If you don't carefully follow the regulations' requirements, you may still
violate the FLSA and jeopardize your employees' exempt status.
Specifically, if you have an "actual practice" of making improper
deductions from exempt employee salaries, you may lose the exemption
for all employees who work in the same job classification and who are
under the manager responsible for the deduction decisions.

Fortunately, the new regulations also provide two "safe harbors" that
allow you to preserve your exemptions if you make mistakes. The first
applies if you unintentionally make improper deductions, or if the
deductions are isolated. In these situations, if you reimburse employees
for the improper deductions, you will not lose the exemptions for those
employees. (This new section effectively replaces the old regulation's
"window of correction," which also allowed employers to correct
inadvertent deductions without losing the exemption.)

A second, new safe harbor is available even in situations where the
deductions do not appear to be inadvertent. This safe harbor applies,
however, only if you (1) have a "clearly communicated" policy that
prohibits improper deductions and includes a complaint mechanism, (2)
reimburse affected employees, and (3) make a good faith effort to
comply in the future. As might be expected, the safe harbor will not
apply if you willfully violate your policy against improper deductions by
continuing to make the deductions after receiving employee complaints.

* New Rule, New Responsibilities *

Before you implement these disciplinary suspensions, you should make
sure your policy and procedures meet the specified requirements. Here
are four steps you should take to apply this deduction:

1. Update your disciplinary and conduct policies to include unpaid
suspensions. Policies to review include your disciplinary procedure, any
general behavior of employees/workplace rules policy, and specific
conduct policies such as those prohibiting harassment and drug use.

2. Implement suspensions only for serious misconduct.
Specifically, this category includes harassment, violence, drug or alcohol
violations, violations of state or federal laws, and major safety rule
infractions that prevent serious danger in the workplace.

3. Make sure any disciplinary suspensions are for full days only.
The DOL comments to the regulations indicate that you can suspend
exempt employees for partial days in the case of major safety rule
infractions. However, to avoid confusion, you may want to implement
only full-day suspensions, even in those cases.

4. If you think you have made a deduction in error, look to the safe
harbors to correct it. To invoke the safe harbor, you must have made the
error by mistake or have a policy against improper deductions. Plus, you
must reimburse your employees for the mistakes.

Remember, too, that even if you don't implement these policies and
procedures, you still can suspend your exempt employees. However,
the suspension must be with pay if it is for less than a full week. Still,
even a paid suspension can be an effective disciplinary technique since
most employees understand clearly that termination will be one of the
next options.
 
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Subscribers to the Personnel Policy Manual and HR Policy Answers on
CD
can find more information on salary deductions and exempt
employees and the limited safe harbor for improper deductions in Hours
of Work, Chapter 207, notes 32 and 33.
 
Not a subscriber? If you would like to order one of our policy chapters,
go to: http://www.hrpolicyanswers.com/xstore/catalog/policieslist.html.

If you have any questions, please call us at 1-800-437-3735. We'll be
happy to help you.
 
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YOU CAN TRUST PPS
Information provided in HR Matters E-Tips is researched and reviewed
by the HR experts at Personnel Policy Service as well as employment
law attorneys. However, it is not intended as legal advice. Readers are
encouraged to seek appropriate legal or other professional advice.

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Service, Inc., to request permission. You can contact her by email at
editor@ppspublishers.com or by telephone at 1-800-437-3735.

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