Payment Deductions for Negative Leave Issue

Generally, federal regulations require that exempt employees under the Fair Labor Standards Act (employed in an executive, administrative, or professional capacity) must be paid their full salary for any week in which they performed work, without regard to the number of days or hours worked. (29 CFR § 541.602(a)). However, there are several exceptions within the federal regulations in which an employer may deduct a portion of an employee’s salary. (29 CFR § 541.602(b)). These exceptions allow deductions where:

1. The employee is absent from work for one or more full days for personal reasons (not including sickness or disability) à Full deduction is allowed
2. The employee is absent from work for one or more full days for sickness or disability, and the reduction is made in accordance with a bona fide “sick leave” plan, policy or practice à Full deduction is allowed
3. The employee misses work for jury duty, attendance in court as a witness, or temporary military leave à Employer may only offset amounts received for the activity against that week’s salary
4. Penalties were imposed in good faith against the employee for infractions of safety or rules of major significance (relating to prevention of serious danger in the workplace)
5. Employee was suspended for one or more full days without pay for disciplinary reasons, imposed in good faith for infractions of workplace conduct rules, pursuant to a written policy applicable to all employees à Full deduction is allowed
6. The salary is for the initial or terminal week of employment à employer may pay proportionate part of employee’s full salary for time actually worked
7. The employee takes unpaid leave under the Family and Medical Leave Act à employer may pay proportionate part of employee’s full salary for time actually worked

According to the exceptions outlined above, an employer is able to deduct from an employee’s salary for time taken off of work for personal reasons, but there are limitations. Essentially, where an employee has taken time off from work for personal reasons without any accrued leave time, the employer basically has three options:

1. Do nothing, pay the employee their full salary;
2. Deduct the portion attributable to the full days missed from the employee’s salary for that period on their next paycheck; or
3. Allow the employee to build up a balance of negative leave, to be made up as the employee accrues more leave in the future.

Because an employer is not required to provide paid time off for exempt employees, it is allowed to use leave time accrued by its employees to “pay down” the negative leave balance. (FLSA 2005-41). As long as the employee receives its full salary for any week in which they work, the employer is in compliance with the FLSA. Provided that the negative leave balance is being paid by accrued leave time, it does not matter if the negative balance is made up of full or partial days of missed work. However, the composition of the negative leave balance (full day vs. partial day) becomes critically important if the employer seeks to deduct a portion of the employee’s salary to cover the balance of negative leave.

Because employers are only allowed to deduct a portion of an employee’s salary for full days missed, it is important that the employer keep detailed and accurate records of the employee’s leave time, identifying full versus partial days. The employer will need to be able to show that the deducted amounts correlate specifically to full days missed by the employee. It may also be helpful for the employer to have a written policy explaining the manner in which the negative leave balance would be reduced, e.g. first hour of accrued leave goes to reduce the first negative hour allowed.

As far as Virginia law is concerned, their regulations do not directly address the issue. However, the Code of Virginia states that an employer shall not withhold any part of the wages or salaries of any employee except for payroll/wage/withholding taxes, or in accordance with law. (VA Code § 40.1-29). Thus, because the federal regulations allow for deductions under the exceptions outlined above, it appears that deductions according to the applicable federal regulations would comply with Virginia law, as well.