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Docking Pay from Exempt Employee as Disciplinary Action

We’re having problems with a few exempt employees constantly submitting late reports. They’ve been counseled and have received written notices in their files. Can we start docking their pay as disciplinary action?

The federal Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments.

Under the FLSA, there are limited permissible deductions from an exempt employee’s salary including:

  • When an 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;
  • To offset amounts employees receive as jury or witness fees, or for temporary military duty pay;
  • For penalties imposed in good faith for infractions of safety rules of major significance;
  • For unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions;
  • In the employee’s initial or terminal week of employment if the employee does not work the full week, or
  • For unpaid leave taken by the employee under the federal Family and Medical Leave Act (FMLA).

Full-day unpaid suspensions for “workplace conduct rule infractions” are permitted. But, this provision refers to serious misconduct such as rules prohibiting sexual harassment, workplace violence or drug or alcohol use or for violations of state or Federal law. Performance issues, such as submitting reports on time, are not considered serious misconduct.

Thus, it’s best to consider alternate ways of disciplining the employees. Consider each employee’s performance and productivity. Is it possible the employee is overwhelmed or has personal matters inhibiting his usual performance? If so, discuss the matter with the employee and determine if there are any reasonable adjustments to allow him to better perform his duties.

If not, consider if this issue important enough that you’re willing to lose the employee. Consider a final warning notice. If the employee continues his substandard performance then termination may be warranted. You may also consider demoting or reassigning the employee.


July 27th, 2017, 1:45 PM |  Posted in: Compensation |
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PTO for Non Exempt Physical Therapists

Our Physical Therapists are classified as Non-Exempt and therefore receive an hourly pay. There are some weekends they are scheduled to work. Generally, they are able to shorten their time on other days in the week to stay at 40 for a given week. When this is not possible, may we offer them the choice of an addition to their PTO or overtime pay? Some would prefer to have the time off than to receive additional compensation.

The federal Fair Labor Standards Act (FLSA) requires private sector employers to pay their non-exempt employees overtime pay at a rate no less than time and a half their regular rates of pay for any hours worked over 40 in a given workweek. The pay must be as cash. Compensatory time off (i.e. additional PTO) in lieu of overtime pay is not permitted under the current law.

Just recently, there’s been federal legislation introduced to allow private employers to offer their non-exempt employees a choice to receive additional PTO in lieu of cash overtime wages. There has been some momentum with the proposed legislation since, as you state, some employees would prefer to the extra time off instead of the cash overtime. We’ll have to wait and see if this ever becomes law. As for now, only public sector employees are entitled to this benefit.

July 27th, 2017, 1:09 PM |  Posted in: Compensation |
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PTO Conversion from Calendar Year to Anniversary Date

Employees currently receive 80 hours of PTO on January 1st. We would like to make a change to one of these two scenarios: convert to an anniversary date accrual rather than January 1st or convert to an accrual plan rather than a lump sum plan. Is it possible to receive advice or suggestions on both scenarios? Thank you very much for any guidance that you can provide.

There are pros and cons to each of the plans you mention. Determining the best option will depend on the number of employees, who’s administering the plan (how much oversight is tolerable), the culture of the company, and employees’ needs/wants.

Calendar Year vs Anniversary Date

The calendar method is straightforward. Everyone gets their PTO on the same date, easy. But, with the calendar year method employees hired mid-year must be pro-rated and there is often a surge of employees wanting to use their PTO at the end of the year (either because they’ve been holding on to it all year to use it for the holidays or because they’re trying to use any remaining time before the plan year is over). Now, there are ways to deter the end of year rush with a calendar method such as allowing negative balances/borrowing PTO, implementing blackout dates for PTO usage, and overall good employee management. This is not an issue when using the anniversary date since employees are usually hired at various times throughout the year. Also, if you plan to tier PTO plans based on tenure, it’ll be easier for both you and the employees to determine which plan/level applies when using the anniversary date.

Lump Sum vs Accrual

With a lump sum method, either calendar or anniversary renewals, there is often less administrative work needed overall. Employees receive a fixed number of hours on their renewal date and that’s it. Employees tend to prefer lump sum methods because they know exactly how much time they’ll have as of a certain date. There’s no need for them to try to figure out how much time they’ll accrue and they won’t have to wait to take time off until they have enough time accrued. This method is fairly simple but calculations may be necessary when an employee separates from the company depending upon the details of the plan.

Accrual methods are popular because they appear to be fairer to both the employer and its employees. With this method employees accrue their PTO as time is worked. So, in theory, you won’t have employees taking time off as soon as they become eligible to do so. But, in reality, there will be times when employees need to take time off without having enough PTO accrued. How you handle this will be a matter of company policy such as borrowing PTO or taking unpaid time off.

When considering a new vacation plan, it’s also best to consider how you will manage carryover, caps/maximums, and payouts. Can unused PTO be carried over in to the next plan year? If so, how much time can be carried over? Is there a limit on the amount of PTO employees can accrue if you decide on an accrual method? Will unused PTO be paid out upon separation of employment? If so, are there certain criteria that must be met in order to receive the payout?

There are no federal laws regarding the administration of PTO for private employers. However, many states have adopted their own regulations on the matter. Most of these states simply require employers to abide by the terms of their own established policies and practices. Thus, it’s best to have a clear, easily understood policy in place and ensure it’s uniformly applied. Some states have imposed stricter regulations such as prohibiting use-it-or-lose-it policies or requiring the payout of accrued unused vacation time at separation. A few states, most notably California, take it a step further and consider earned vacation time to be earned wages.

Be sure you’re aware of any PTO/vacation laws in your state prior to implementing a new policy.

Again, which plan is best really depends on the company and its employees. Feel free to post a comment below if you have more questions on this topic.


July 27th, 2017, 12:47 PM |  Posted in: Benefits |
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Altered Dr’s Note

An employee called out for the week with a Dr’s note. When the employee texted me a picture of the note it had parts blacked out. I informed them I needed the hard copy when they return to work. If they return with the altered Dr.’s note, can I request an unaltered one?

An employer may request a Doctor’s note from employees as part of an attendance or sick leave policy as long as such policy/practice is uniformly applied. The purpose of the Doctor’s note is to confirm the employee’s visit and any period of partial or total incapacity to perform his job duties. The note shouldn’t include any diagnosis or treatment.

Consider what parts of the note are blocked out. Could they possibly be private medical information? Is the pertinent information available i.e. the date/time of the employee’s appointment and any job restrictions? If so, it’s best to accept the altered version. If you require the employee to submit the original note which may include private medical information, you risk violating a few federal laws, namely the Americans with Disabilities Act (ADA).

If parts of the note were blocked to alter the date of service or change the employee’s work restrictions in any way, then an unaltered note may be requested. If this is the case, be clear with the employee that you aren’t seeking a diagnosis or medical condition and that your focus is on confirming the date the employee was seen and any limitations to his work duties/schedule.


July 24th, 2017, 2:28 PM |  Posted in: Attendance Management |
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Timekeeping for Exempt Employees in Illinois

What is the industry practice for keeping a record of exempt employee’s work hours in the state of IL? We use ADP, for time and attendance. Should we have the exempt employee clock in/out each day?

Timekeeping for exempt employees is at the discretion of the employer under federal law, specifically the Fair Labor Standards Act (FLSA). However, some states have adopted their own timekeeping laws and Illinois is one of them.

Illinois Administrative Code Section 300.630 requires employers to maintain accurate time records for all employees, regardless of an employee’s status as exempt. The records must include the employee’s name and address, hours worked each day in each workweek, rate of pay, copies of all notices provided to the employee, amount paid each pay period and all deductions made from wages or final compensation.

Though there is no specific timekeeping method required, clocking in/out each day is an acceptable (and safe) method of timekeeping, even for exempt employees.

Just be ready for some backlash from the exempt employees. Many exempt employees like not having to punch a clock. It makes them feel more “professional”. Consider sending a notice to all affected employees stating the law and the new timekeeping policy/procedure. Be open to questions and feedback.


July 24th, 2017, 2:10 PM |  Posted in: Attendance Management |
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