Not legal advice. Educational guide to general U.S. employment law. Rules vary by state — consult an employment attorney for specific cases.
01
The salary basis rule
The salary basis test — one prong of the three-part exemption test — requires that an exempt employee regularly receive a predetermined amount that is not subject to reduction because of variations in the quality or quantity of work performed, per 29 CFR 541.602. Subject to seven narrow exceptions, the employee must receive the full salary for any week in which they perform any work. Payroll shortcuts that treat exempt salaries like hourly wages — docking for a short day, a slow week, a broken laptop — attack the exemption itself, and with it the overtime shield.
02
The seven permitted deductions
1. Personal absenceFull-day absences for personal reasons other than sickness or disability — full days only, never partial.
2. Sickness/disabilityFull-day absences under a bona fide sick-pay plan, policy, or practice — before eligibility or after exhaustion.
3. Jury/witness/military offsetsYou may offset the fees or pay received; you may not dock for the absence itself in a week where work was performed.
4. Major safety violationsPenalties imposed in good faith for infractions of safety rules of major significance.
5. Disciplinary suspensionUnpaid suspensions of one or more full days under a written conduct policy applied to all — the harassment-policy suspension is the classic case.
6. First and last weekProportional pay for the initial and terminal weeks of employment.
7. Unpaid FMLAIntermittent or reduced-schedule FMLA leave may be docked — the one place partial-day deductions are lawful.
03
Deductions that break exemptions
Everything else: partial-day personal absences, business closures (weather, slow season, equipment failure — if the employee is ready to work, the week must be paid), poor performance, cash shortages, damaged property, missing timesheets. The compounding danger is an actual practice: repeated improper deductions cost the exemption not just for the docked employee but for all employees in the same job classification under the same managers — which converts one payroll habit into a class-wide overtime liability computed per the regular-rate rules.
04
The safe harbor
Regulation 541.603 offers the out: a clearly communicated written policy prohibiting improper deductions, a complaint mechanism, reimbursement of improper deductions, and a good-faith commitment to comply. With that in place, isolated or inadvertent errors don't destroy the exemption. It costs a paragraph in the handbook — the cheapest insurance in wage-and-hour law. Pair it with a payroll rule that no exempt salary is ever docked without HR sign-off against the seven exceptions above.
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Frequently asked questions
Can we dock an exempt employee for a half day off?No — personal-day deductions are permitted only in full-day increments. Take a partial day from the PTO bank if policy allows, but if the salary itself is docked for a half day, the deduction is improper.
Can we dock exempt pay when the office closes for weather?If the business closes, no — an exempt employee ready and able to work must be paid for the week. If the business is open and the employee stays home for personal reasons, a full-day personal deduction is allowed.
Can we dock exempt employees for poor performance or damaged equipment?No. Quality-of-work deductions violate the salary basis directly, and equipment or cash-shortage deductions are treated the same. Discipline through the disciplinary suspension rules, not the paycheck.
What happens if we made improper deductions?Isolated or inadvertent deductions don't cost the exemption if you reimburse. An actual practice of improper docking loses the exemption — with overtime owed — for the period of the practice, for employees in the same job class under the responsible managers. The written safe-harbor policy is what keeps mistakes in the 'isolated' category.
