Overused paid-time off: What you can do
August 25, 2009 by Bill MeltzerPosted in: Latest News & Views, Pay and benefits, policies
Many firms dock a salaried employee who has used up his or her allotted paid time off (PTO) and is then absent from work. Is this policy legal under FLSA?
The answer is yes – so long as you meet certain requirements. According to the Department of Labor, PTO banks, paid vacation and paid sick days are fringe benefits, which aren’t covered by FLSA.
As a result, you’re allowed to make deductions for absent employees who have already used up their PTO. Three conditions:
- Your organization must have a “bona fide” PTO (or separate vacation and sick day) benefits plan.
- Deductions for a salaried employee’s unexcused absences come in full-day increments, and
- Your state and/or local labor laws don’t prohibit deductions.
What’s meant by bona fide?
In order to be considered a bona fide benefits plan, your paid time off policy (including the potential for deductions resulting from accidentally overused PTO) must be communicated in writing to employees.
This requirement is partially met by including a section on PTO in your benefits handbooks.The other part: administering PTO policies exactly as they’re described.
Important: Under FLSA, if you don’t have a bona fide PTO plan, it’s illegal to make deductions.
Even if your PTO plan allows salaried employees to take partial days off, you should only make deductions on a full-day basis. Reason: Under FLSA’s arcane formula for determining if an employee is exempt or non-exempt from overtime, partial-day deductions may compromise an exempt employee’s overtime status.
Under FLSA, the amount of salaried compensation includes only only base pay – not fringe benefits. Therefore, while you can measure benefits in partial-day increments, corresponding pay for exempts must be measured in full-day increments.
Note: Partial-day deductions won’t automatically make exempt employees non-exempt in every case. But to be sure, you’d have to first perform the wage tests required by the feds.
Tags: compensation, paid time off
August 27th, 2009 at 9:23 am
Our management created this policy, it does not meet the full day deduction for salaried employees. Is this something HR needs to redefine?
Some employees are routinely not working a minimum of 40 hours a week. All employees of LWI have an obligation to the company and to your coworkers to meet this minimum.
All Employee: includes salary/hourly/exempt/non-exempt/office/warehouse
• When making up hours (absent during a work week), employees are authorized:
• A maximum 2 hour make up.
• Are allowed to make up only one occasion per week.
• All additional hours will be charged to PTO.
• If a minimum of 6 hours is not worked in a day, the remainder will be charged to PTO.
• All full days or partial days missed for vacation, illness, personal will be charged to PTO.
• PTO will be applied to hours missed up to negative 40. PTO cannot exceed 40 hours negative.
As stated in the handbook, excessive absences will be evaluated on a case by case basis. Disciplinary
August 27th, 2009 at 3:05 pm
Tried clicking on the Wage Tests link at the bottom of the article. but it is giving me the following message: Page Not Found. The page you requested (http://www.hrmorning.com/overused-paid-time-off-what-you-can-do/) wasn’t found on our Web site. If you followed the link from another Web site, the link they provided may be outdated. Please check our Topics area or our A-Z Index to find what you are looking for.
Entering Wage Tests, gives a lot of results. Is there anything else I can add to the search to get to what you are referencing?
Thanks.
September 10th, 2009 at 10:51 am
The definition of an exempt employee is one who is paid to do a job, no matter how many. This means that they are paid to get a job done even if it takes 60 hours a week to do it. It also means that they get paid to do the job even if they can do it in 35 hours a week.
I would not have this policy. If you have an employee who is exempt and working 35 hours per week, find out if the job is actually getting done. If work is not done timely or well, then it is a performance issue. If the job is getting done in less than 40 hour per week, you may have a talented person who needs more challenge.
Stick to performance as the issue (good or bad) and stay away from “requiring” 40 hours. Requiring 40 hours every week builds in disincentives to working longer hours other weeks when necessary. You should give your exempt employees the latitude to structure the job to get it done and not worry about the hours they put in. I have found that employees who disappear from work early on a regular basis without corresponding weeks of longer hours are your performance problems, anyway.