Exempt employee vacation bank docked for personal day

Corrugaty · April 2001

An expempt employee actually worked over 40 hours in a regular 5-day work week but missed one full day for personal business. Owner wants to dock employee's vacation bank for the missed day. Can this be done without causing all sorts of trauma? We have no policy to use vacation time in a situation like this.

Theresa Gegen TX · April 2001

As far as overtime laws, employers generally only get into trouble when they dock an employee for less than a full day missed (you don't have to pay an employee if they miss a full day).

But, since your company doesn't have a policy, and the employee did put in a full 40 hours, you might want to let this one pass and just publish a policy to apply in the future and let all the employees know about it. (Doing something like this retroactively can really hack off an employee). And if your company has ever treated anyone inconsitantly in the past, it can come back to haunt you. Your boss can consider it cheap tuition.

Miriam · April 2001

Hi, I have a question. When you have an exempt employee that is out for personal reasons for less than 8 hours - can you deduct that time from their personal/sick day accruals? Or does it have to be a full day in order for you to deduct it from their personal/sick accrual time?

Margaret Morford · April 2001

It has to be a full-day increment. Otherwise, Wage and Hour says that you are treating them like non-exempts, the company loses the exemption and owes the exempt employee overtime for all hours worked over forty. You should only charge the sick/vacation/personal bank in whole day increments. FMLA can be counted in less than whole day increments for both exempts and non-exempts. If you want to discuss further, please call me at 615-371-8200.

Crash · April 2001

I recently read an article that addressed this precise issue. The article stated that the Department of Labor and most federal courts agree that the use of accrued paid time off, such as vacation time, can be used in partial day increments for personal reasons without compromising exempt status because the individual receives pay for a full 40 hours. It's only when the individual has no accrued leave that the salary cannot be docked for partial-day absences without jeopardizing exempt status. Now I'm really confused. Is this one of those issues that does not have a definite answer?

Corrugaty · April 2001

I would like to read that article, Crash. I'm bothered in my situation with the fact that all of the employee's work was done, nothing was left open, she worked over 40 hours and now the boss wants to dock her vacation bank. It just has an unpleasant smell to me. I need this employee to go the extra mile on a regular basis but the company can't do the same? It is the first time this has come up with our company, it just doesn't make sense and I'm worried that this may upset her enough to make it an HR issue. I'd like a clear answer about our legal status and I don't think there is one...or is there???

VanEngen · April 2001

Once again, you need to look at your policies to see if you give any exceptions. As far as the law is concerned though, if they take a full day off they can be told to take a vacation day. Last week I worked 41 hours and had an 8 hour vacation day. It doesn't seem fair, but that is how a true exempt status works.

On the other hand, the employee may work only one hour in a day and get 8 hours pay for that day.

Once you make this individual take a vacation day, you need to make the VP of Marketing (just an example) take a vacation day even though she worked over the weekend. You need to remain consistent at all times...if you don't, that is where you will get into trouble.

Juneau · May 2001

I have just done lots of research on this matter. I agree with CRASH, that as long as there is a bonefide sick/annual benefit, the employer can dock the leave bank without jepordizing the exempt status of that position.

This applies to Alaska Wage & Hour laws, and when I spoke with Federsal Wage & Hour they said they don't get into the benefit side of things, but if you are not decreasing the employees salary by using a bonefide sick/annual leave policy you may deduct for less than a day. If an exempt employee has no leave on the books, you may not decrease their salary for that time off.

System · April 2001

This message is in response to Miriam’s question about docking exempt employees’ vacation or sick leave for partial day absences. There have been apparently conflicting answers posted on this question, but those answers can be reconciled with just a little clarification.

Let’s start with “Crash’s” message stating that it’s OK to dock vacation time in partial day increments without compromising exempt status. That contradicts the previous message from Margaret stating that you can only charge the sick/vacation/personal bank in whole day increments.

In my opinion, both Crash and Margaret may be correct depending on the circumstances. Here’s why. Crash is correct that, generally, most courts allow employers to deduct partial day absences from the accrued sick or vacation leave of an exempt employee provided that the employee’s salary that week is not reduced. The rationale is that such leave is considered a fringe benefit – not a part of the employee’s compensation.

But here’s the catch: What if an employer allows employees to CASH IN accrued leave? Some courts have held that, in these circumstances, the employer may not deduct partial day absences from an exempt employee's leave because that leave is equivalent to compensation. This is probably the case law that Margaret was referring to.

I hope this helps.

Julie Athey
Senior Attorney Editor
M. Lee Smith Publishers
Author, “Defusing the Overtime Bomb: How to Comply with the FLSA”

Jeff · April 2001

This question is regarding J Athey’s legal response about docking exempt employees’ vacation or sick leave for partial day absences. She wrote "But here’s the catch: What if an employer allows employees to CASH IN accrued leave? Some courts have held that, in these circumstances, the employer may not deduct partial day absences from an exempt employee's leave because that leave is equivalent to compensation. This is probably the case law that Margaret was referring to. " That is the situation in my company. Where can I find case law documention relating to this circumstance??

System · April 2001

Jeff -

I've looked back over my research and have only been able to find two cases that discuss this precise issue (without totally researching the issue from scratch). The first case is Graziano v. Society of the New York Hospital, a 1997 case out of the Southern District of New York. The second is a Connecticut district court case, also from 1997, involving Electric Boat Division of General Dynamics Corporation. I'm sorry I don't have better case citations for you. If you're familiar with legal research at all, I would recommend shepardizing the Graziano case to find other cases that may have cited it -- either in approval or disapproval of its conclusions.

Sorry I could not be of more help.

Julie Athey
Senior Attorney Editor
M. Lee Smith Publishers

Miriam · April 2001

This is in regards to another topic - There was an employee over 40 who was hired for a fulltime regular position - she was laid off of that position due to cut-backs - the company offered her another position but with lower pay and another classification (temporary). This employee was placed in another department where they employed someone younger than her in the position she was entailing, then they let her go all together. Here's the catch, in the meantime that she was supposed to be temporary - they paid her benefits and sick time as well. Isn't this misclassification and does this case fall under the ADA or Older Workers Protection Act? This employee prior to working for that company was employed for 7 years and was recruited out for a better position only to be laid off and brought down to temporary and then let go all together. Does this person have a case against this company and if so what law would it violate if any?

Christine · April 2001

I would like to get further clarification on this issue for public employers, and here are my specifics:

I work for a city in Arizona. Our Assistant City Manager who has been employed by the City for three months just went out on maternity leave. She has approximately 33 hours of sick leave, and because she has not completed her probationary period of six months, she cannot use any of her accrued vacation leave. She worked a full day on Monday, February 5. She had the baby on Tuesday, February 6, so she hasn't worked since the 5th. My plan is to pay her for the week of February 5 but to exhaust all of her sick leave, and from then on she will be on unpaid leave. She is not eligible for FMLA, however the City has a policy of giving 120 days of unpaid leave for pregnancy. Because she is senior management she is available via telephone while she's at home. She has indicated to me that she will be working approximately 10 hours a week while she's on leave, and wanted to get paid for those hours. Obviously I cannot pay her for those hours because it would jeopardize the exempt status. So, basically we pay her all or nothing. I would like clarification that I'm safe in paying her 40 hours the week of February 5, while exhausting her 33 hours of sick leave, and then placing her on unpaid leave.

Thanks for your help.

dhnyct · April 2001

This goes back to a problem I had some time back. How do you compensate the 10 hours of work each week while exempt management employee is still at home?

System · April 2001

In order for employees to be exempt from overtime, they have to meet two basic tests. First, they have to perform exempt duties (i.e., professional, executive, administrative). Second, they have to be paid on a salary basis.

It seems to me that all you have to do is temporarily pay your employee an hourly rate while she is working part-time. That alone is enough to change her status from exempt to non-exempt. Then, when she comes back to work full-time, you can start paying her a salary again and reclassify her as exempt.

As long as you are changing the classification in good faith and not in an effort to avoid paying overtime owed, I don't see a problem. Under your analysis, you could never employ anyone who performs exempt duties on a part-time basis. I don't think that's what the FLSA intends or the DOL expects.

I suspect that the DOL regulations discuss changing employees from exempt to non-exempt status, but I haven't specifically researched the issue. I would be very interested in hearing what others think about this.

Julie Athey
Senior Attorney Editor
M. Lee Smith Publishers

Rockie · May 2001

To be perfectly safe, I would not dock an exempt employee for any time, whether it be pay wise or PTO wise for less than a full day. Legally, in some instances, you may be able to get away with docking the PTO "bank", but because we expect our exempt people to work more than 40 hours per week, sometimes evenings and weekends, then I feel it is not a good employee relations move to dock for these small increments of time. It would not be worth the headaches to try to deal with this issue.

Exempt employee vacation bank docked for personal day

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