When is it legal to dock an employee’s pay for poor performance or misconduct?

Due to their performance problems and being written up, I wanted to temporarily reduce pay for some employees for a week or give them a day without pay. Are both legal, and which one is the best?

Posted 08-19-2015

Ann Kiernan replies:

I can’t tell you which is best, but I can tell you about the law. Under federal law, if you are dealing with non-exempt (hourly) employees, it is legal to reduce their pay, so long as they receive at least minimum wage and overtime if they work more than 40 hours in a week. You can suspend them without pay, as well.

For exempt (salaried) employees the rules are different. You can dock their pay only as a penalty for violating safety rules of major significance, such as rules prohibiting smoking in explosive plants. Further, if you have a written policy on the subject, you can impose unpaid suspensions on exempt employees for infractions of workplace conduct rules, such as those prohibiting sexual harassment, workplace violence, drug or alcohol use, or violations of state or federal laws, but not for performance or attendance issues. Such disciplinary deductions may only be made in full day increments.

Information here is correct at the time it is posted. Case decisions cited here may be reversed. Please do not rely on this information without consulting an attorney first.


About the Author:

Ann Kiernan has litigated claims of wrongful discharge and discrimination before state and federal courts and administrative matters before the New Jersey Division on Civil Rights, the National Labor Relations Board and the Equal Opportunity Employment Commission, representing both employers and employees. Ms. Kiernan co-hosted The Employee Rights Forum, a weekly radio call-in show reaching up to a half-million listeners in the New York metropolitan area, and her articles on employment law have been published in many books and magazines. Both as a firm partner and as a director, Ms. Kiernan gained solid experience in management and human resources compliance. She has worked with Fair Measures since 1997.