Among cherished employee rights are time off, vacation time and sick time. What do you do when an employee request time off? Even if just for a half-day? You are probably thinking to yourself, “That has got to be the dumbest question Haberman has ever asked.” In reality it is not quite as straight forward as you think, because of differences in exempt employees and non-exempt employees, and how you handle time off requests differs with each.
Defining the Non-Exempt vs. Exempt Employees
The confusing issue is paid time off versus non-paid time off. With non-exempt employees, it is fairly simple.
According to the FLSA, non-exempt employees only have to be paid when they work, so they may take partial unpaid vacation days any time an employer authorizes the time. Because of this, absenteeism is kept to a minimum. Exempt employees are not so simple and how you handle their time off may run you afoul of the Fair Labor Standards Act. Basically in the private sector employers that make deductions from exempt employees’ pay for absences of less than a day may jeopardize their exempt status under the FLSA. This may expose the employer to liability for any overtime worked by the employees and even constitute a violation in paid time off laws.
Paid Time Off or Absenteeism?
Let’s review. Exempt employees are exempt from the FLSA’s minimum wage and overtime requirements because of the nature of their job duties and the fact that they are paid on a salary basis. The term “salary basis” is defined by the FLSA regulations as the payment on a weekly or less frequent basis of a predetermined amount that constitutes all or part of compensation, without reductions for variations in the quality or quantity of the work performed.
Under this definition, exempt employees generally must receive their full salary for any week in which they perform work, without regard to the number of days or hours worked.
Generally if the exempt employee has paid time off available you can require them to use vacation time for partial day absences. This may safeguard the exempt status since this does not reduce the employee’s compensation. The Department of Labor (DOL) generally has considered this type of arrangement permissible. In the comments to the current regulations (implemented in 2004) the DOL specifically restates this position acknowledging that employers may make deductions from exempt employee leave accounts without jeopardizing the employee’s exempt status. Several courts have adopted this position, although a few have disagreed. Those that disagree have determined that this practice, even without an actual loss of pay, treats the exempt employee like an hourly, nonexempt employee and, therefore, triggers loss of the exempt status. So you need to understand the state law where your business resides.
If an exempt employee has taken all their vacation time, sick time or other paid time off the FLSA regulations do allow docking of exempt employees for full day absences taken when the employee has exhausted absenteeism. Specifically, deductions are allowed for absences from work of one or more full days for personal reasons, unless those days are for sickness or disability. As an example, if the employee is absent for two full days to handle personal matters, those two days may be deducted from the employee’s salary without having an effect on the exemption. If you have a bona fide sick leave policy, plan, policy, or practice that provides compensation for loss of salary as a result of sickness or disability you may make deductions for a full day’s absence due to illness or injury. But if you had no such plan you cannot make these deductions.
How you and your company manage and keep track of the time off, is up to you and them.
Understanding the FLSA Act and the Regulations for Employee Rights
According to the FLSA regulations 29 CFR 541.602(b)(2):
(2) Deductions from pay may be made for absences of one or more full days occasioned by sickness or disability (including work-related accidents) if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for loss of salary occasioned by such sickness or disability. The employer is not required to pay any portion of the employee’s salary for full-day absences for which the employee receives compensation under the plan, policy or practice. Deductions for such full-day absences also may be made before the employee has qualified under the plan, policy or practice, and after the employee has exhausted the leave allowance thereunder. Thus, for example, if an employer maintains a short-term disability insurance plan providing salary replacement for 12 weeks starting on the fourth day of absence, the employer may make deductions from pay for the three days of absence before the employee qualifies for benefits under the plan; for the twelve weeks in which the employee receives salary replacement benefits under the plan; and for absences after the employee has exhausted the 12 weeks of salary replacement benefits. Similarly, an employer may make deductions from pay for absences of one or more full days if salary replacement benefits are provided under a State disability insurance law or under a State workers’ compensation law.
Simple Exempt Employee FLSA Time Off Solution
Question is what if an exempt employee wants to take a longer lunch or some time off on Thursday to go to their daughter’s school play. Do you require them to use PTO or paid time off for that time or do you allow them to take that time off without asking them to submit the PTO or time off request?
There is, in my opinion a simple solution to problem of exempt employees taking half days off. JUST LET THEM DO IT. Generally they are working more than 40 hours a week anyway. (If not, then you have another issue perhaps.) So if they have an occasional request for time off in the afternoon or morning off give it to them. After all, you are most interested in their productivity not their attendance. Or at least you should be.
As a business leader, you’ll need to weigh the risk. You’ll need to ask yourself what is more important to you? Is giving your employees autonomy and flexibility in their schedules worth the occasional misuse or abuse more important? Or is the risk of creating a work culture among your leaders that leads with control and rigidity? The latter could result in some business challenges including increased turnover and lower morale. Given the current market for talent, I recommend airing on the side of flexibility. Even average leaders are hard to come by these days and a little kindness, compassion, and flexibility could go a long way in retaining your people and setting the tone for the kind of work culture you want to foster.