Salary-Basis Deductions for an Exempt Assistant Manager
R. Patel is an assistant store manager paid a $1,200 weekly salary and classified exempt. Patel schedules six employees, orders inventory, and handles escalations, spending about 60% of time on management and 40% cashiering. In a two-week period, Week 1 Patel worked 3 days and took 2 full days of personal leave. Week 2 Patel worked 3 days, was out 1 full day sick, and served 1 full day of unpaid disciplinary suspension for insubordination under a written workplace-conduct policy. Patel has 3 accrued sick days, and policy says sick leave is used first. Payroll deducted $480 personal leave in Week 1, and $240 sick plus $240 suspension in Week 2. Patel also worked 50 hours in Week 1. Payroll asks whether the deductions and overtime treatment are correct.
1. Evaluate each deduction against the salary-basis rules.
Read the worked answer
- Week 1 personal leave, 2 full days, $480: allowed. Full-day personal absences (other than sickness/disability) may be docked.
- Week 2 sickness, 1 full day, $240: not allowed as a salary deduction here because Patel has accrued sick leave under a bona fide plan. The day should be paid from the sick leave bank; the salary deduction should be reversed.
- Week 2 disciplinary suspension, 1 full day, $240: allowed if imposed in good faith for a workplace-conduct infraction under a written policy. It would not be allowed for poor performance or a partial day.
- Overtime for 50 hours: not due if Patel meets both the salary-basis and duties tests. The 60% management time supports exempt status, but the duties test must be met overall.
2. Compute the correct gross pay for the two weeks and the underpayment.
Read the worked answer
Week 1: $1,200 - $480 personal = $720.
Week 2: $1,200 - $240 suspension = $960. The sick day is paid from accrued sick leave and does not increase pay above the salary; it simply prevents the $240 salary deduction.
Correct two-week gross: $720 + $960 = $1,680.
Paid: $720 + ($1,200 - $240 - $240) = $720 + $720 = $1,440.
Underpayment: $1,680 - $1,440 = $240, plus applicable payroll taxes and corrections. The sick leave bank should be debited for the sick day.
3. If this sick-day deduction happened to 10 exempt managers every pay period, what is the exemption risk and how should it be corrected?
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A single inadvertent deduction may be corrected under the salary-basis safe harbor/window of correction. But a pattern or practice of improper deductions can defeat the exemption for affected employees, exposing the employer to overtime for all hours over 40 in each workweek. The employer should stop the deductions, reimburse affected employees, adopt a written policy prohibiting improper deductions, establish a complaint procedure, and audit exempt pay codes. The safe harbor is not automatic if the employer has a practice of making improper deductions.