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Salaried Exempt Employees
There is much confusion about the deductions that an employer may take from salaries of employees without jeopardizing their exempt status. This information will help you understand the complex regulations that govern this area.
 
Q. What does it mean when an employee is "exempt"?
A. If employees are exempt from the payment of overtime, they are classified as "exempt employees."
 
Q. How do you determine who is exempt from overtime?
A. There are five different tests that must be met in order to be classified as exempt. "Answering Your Questions About Classifying Exempt Employees."
 
I understand that a basis for determining whether employees are exempt is that they are paid on "a salary basis." What does that mean?
A. In general, an employee is considered to be paid on a salary basis if he/she receives a predetermined amount (salary) for the pay period, and that amount is not subject to reduction in any week in which he/she performs any work, regardless of the number of days or hours worked.
 
Q. Does this mean that deductions are never allowed from the salary?
A. No. Deductions may be made in the following situations:
  • Employees need not be paid for any work week in which they perform no work.
  • Deductions may be made when the employees are absent from work for a day or more for personal reasons.
  • Deductions may be made when the employees are absent from work for a day or more for sickness or a disability if the employer has a bona fide plan, policy or practice of providing compensation for loss of salary occasioned by both sickness and disability.
Q. Does this mean that if an employer does not have a paid sick leave plan that covers both sickness and disabilities, the employer could not deduct for such sickness and/or disability?
A. Yes. If there is no plan, policy or practice of providing compensation for such sickness or disability the deduction would be disallowed if the employee were to remain exempt.
 
Q. May I deduct for a day or more of sick leave if the employee has not been with my company long enough to qualify for compensation under my sick leave plan?
A. Yes.
 
Q. If an employee has used all accrued sick leave, may I deduct for periods of less than a day?
A. No. Deductions may only be made for a day or more.  (Note that this restriction does not apply to public agencies which are allowed to dock an exempt employee for absences of less than one day.  See OAR 839-020-0330(1).)
 
Q. What kinds of deductions would not be allowable if the employer wants to regard the employee as being paid on "a salary basis"?
A. Deductions may not be made for:
  • Time when work was not available.
  • Absences occasioned by the employer or by the operating requirements of the business.
  • Absences caused by jury duty, attendance as a witness or temporary military leave. The employer may, however, offset any amounts received by an employee as jury or witness fees or military pay for a particular week against the salary due for that particular week without loss of the exemption.
  • Absences of less than one day.

Note that although the employer is prohibited from docking an exempt employee for such absences, the employer may require that the exempt employee use accrued paid leave consistent with the employer's policies.