When Exempt Employee Has No PTO, Takes Time Off

PTO helps to bridge the gap between being required to pay salaried employees their full salary in a given workweek (even if they don’t work a full workweek), while also balancing how much time off can be taken without it becoming a problem.

Employers often find themselves in a conundrum, however, over how to handle miscellaneous time off that was never even requested as PTO. For example, what happens when the work hours are 8 a.m. to 5 p.m., but an employee has a personal appointment that requires him or her to arrive late? Usually this is not much of a question—that employee takes PTO for the time off and comes in as soon as possible and still receives a full salary for the week. But what if that employee doesn’t have any more PTO left to use? What if it’s not an appointment, it’s just a significantly late arrival time?

This is where it starts getting tricky and can quickly escalate. This scenario has multiple angles to consider:

• What policies are in place to govern this situation? For example, does the employer have a policy delineating specific work hours that salaried employees must be present in the office?
• How are other employees treated? Employers need to be sure to treat employees consistently in regard to rule enforcement and disciplinary actions, including the use of PTO.
• What action can be taken? How can the employer curb this behavior? Docking pay? Discipline? Change in policy?

Here’s a deeper look at each of these aspects.

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What Policies Are in Place? Are They Consistently Followed?

What policy is in question here? This is the first question that must be posed. In our scenario with the employee who shows up late, this is a critical question. Is there a policy against this? Or is arrival time merely a custom that most employees follow out of habit? If there is not a clear policy that has been broken when an employee shows up late, then the employer is more limited in what actions can be taken against the employee while still being fair. In the absence of a defined policy delineating work hours (and, ideally, a rationale for that policy that is consistent with business needs), there may be little action that an employer can take. The issue here is: What rule is being broken? (If there’s not a rule, should there be one?) What harm is being done? And are all employees being treated equally on this point?

This brings us to the next point: consistency. Even if there is a clear policy in place, it needs to be applied consistently. For example, if one employee routinely comes in a bit late but it’s overlooked but another comes in late and is disciplined, this could raise red flags. Another example might be when one employee is disciplined or otherwise negatively affected for needing to take time off after his or her PTO has run out, but another employee is not—even if it’s just an oversight. These scenarios could even lead to claims of discrimination. Discrimination can actually happen very easily and even without intent.

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What Actions Can Be Taken to Curb This Behavior?

When faced with this situation, there are several actions an employer might take but be careful.

It’s easy to think that the lack of available PTO now means the employer should be able to reduce the employee’s pay, just as you would for an hourly employee who showed up late. But this just isn’t an option in most cases of salaried employees, primarily because reducing their pay could jeopardize their salaried status—and that status is a requirement for retaining their exemption from overtime regulations. If the employee is not paid on a salary basis and loses the exempt status, the employer may be liable for overtime pay from the past. This is obviously not the route we want to take.

Note: There are a few exceptions in which even an exempt employee can face a pay deduction, such as for FMLA leave and some other full-day absences as allowed by the FLSA. This article is only addressing absences of less than a full day.

In tomorrow’s Advisor, steps to take to deal with partial day absences, plus an introduction to the practical solution guide for managing while avoiding wage hour hassles, headaches, and lawsuits.