Overtime Laws

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Improper Deductions from Wages

Under certain conditions, deductions from an employee’s predetermined amount of pay each pay period are permissible. These include:

• For absences 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 military 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;

• For weeks in which an exempt employee takes unpaid leave under the Family and Medical Leave Act; or

• During the initial or terminal week of employment

If an employer improperly deducts pay from an employee’s salary in violation of the Act, and such deduction is not inadvertent or an isolated incident, the result could be loss of an exemption. That is—the employer will lose the exemption if the employer has an “actual practice” of taking improper deductions from an exempt employee’s salary. If such an “actual practice” is established, the employer’s exemption is lost for the time period during which the deductions were made.

Nonetheless, the Act includes a “safe harbor.” If an employer meets the requirements of the safe harbor, the exemption will not be lost unless the employer willfully violates the policy. To fall within the provisions of the safe harbor, the employer must: (1) has a clearly communicated policy prohibiting improper deductions, including a process to voice complaints, (2) reimburses employees for improper deductions, and (3) makes a good faith effort to comply with the Act in the future.

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For Specific Examples of Deductions Click Here.

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