How do you handle exempt employees and PTO together? Why does an employee’s exempt status matter for the purposes of taking time off? It comes down to the decisions employers make when exempt employees do not work a full day. Can an employer require an exempt employee to take PTO for the hours not worked that are part of a standard work day?
“When exempt employees get PTO and they work only partial days, it presents special problems.” Daniel B. Chammas told us in a recent BLR webinar. Exempt employees often do not have set hours; that is why they are exempt. They’re more independent and are paid for the job, and not for their time. “So when an exempt employee comes in late, what should an employer do? The best answer is that if there is an established work schedule for an exempt employee, then the employer can deduct partial day absences from an exempt employee’s PTO or vacation bank.”
The established work schedule is the key. In those cases, the employer can deduct the time missed from the vacation or PTO bank. If the employee doesn’t have set hours, it’s much tougher. They’re not late if they don’t have a set schedule. The law on this varies by state and by employer policy as well.
“Think twice about deducting vacation wages or vacation time from exempt employees’ work days.” Chammas advised. Consider all of the details of the situation before taking action.
Exempt Employees and Unpaid Time Off
Paid time off presents its own challenges, but what about unpaid time off? Can an employer require an exempt employee to take unpaid time off?
Actually, yes. An employer may tell an exempt employee to take an entire week off, but the exempt employee must be told of the full-week furlough before the workweek starts.
“Full week furloughs allow an employer to impose an unpaid leave of absence on an exempt employee. This can certainly help struggling businesses cut labor costs.” Chammas explained.
Unpaid leave may be imposed on exempt employees for even partial workweeks, but this is much more intricate than full workweek furloughs. Ordinarily, an employer cannot deduct from an exempt employee’s salary in increments of less than a week because of operating needs of the business.
“This all gets back to the basic principle that if an exempt employee works any part of a week, then you have to pay them for that whole week if they’re ready, willing, and able to work that whole week.” Chammas told us. Asking them to take a partial week unpaid strikes against the entire premise of exempt employees: that they are not paid for their time and receive a salary for the work they offer to provide. As such, “you’re usually not allowed to say [to] take part of a week off, because . . . that says that you’re not paying them for the job, you’re paying them for the time, and you might lose the exemption as a result.”
That said, employers are allowed to do an unpaid leave of absence for exempt employees, even for partial work weeks, under very limited circumstances when the employer is resetting the exempt employee’s job such that, going forward, the employee is required to work only three or four days per week. It is basically changing their job.
This cannot be an intermittent, week-to-week assessment. It must be a good faith, looking forward, fixed (not fluctuating) workweek change. It can go back to a full workweek when business conditions permit. The upside is that it can allow employers to make an adjustment in lieu of layoffs.
For more information on how exempt employees and PTO considerations interact, or on the circumstances that might necessitate an unpaid leave for an exempt employee, order the webinar recording of “Mastering Everyday PTO Challenges: Curb Abuse, Cut Absenteeism, and Comply with the Law.” To register for a future webinar, visit http://store.blr.com/events/webinars.
Daniel B. Chammas, Esq., is a partner in the labor and employment practice group in Venable’s Los Angeles office. He has extensive experience defending employers in wage and hour class actions and other employment disputes, from actions for unpaid wages and sexual harassment claims to wrongful termination litigation and racial discrimination complaints.