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Withholding Pay as a Disciplinary Measure

Let’s say you have an employee who can’t seem to arrive at work in a timely manner. Despite numerous conferences with this employee about the importance of being prompt, his tardiness continues. You might be tempted to begin withholding pay as a disciplinary measure. The question is whether you, the employer, are permitted to do so. The answer is contingent upon whether the employee’s position is considered exempt or non-exempt.

Non-Exempt Employees
First, let’s look at non-exempt, the status reserved for hourly workers. The rules governing non-exempt employees are clear: an hour is paid for each hour that is worked. If your tardy employee is non-exempt, then you needn’t compensate him/her for any hours that were not on the clock. Legally, you can dock the pay commensurate with the amount of time the employee failed to complete the scheduled work hours.

Another approach may be to lower the employee’s hourly wage as a means of disciplinary action, even if only for a brief period (but never decreasing compensation below the established minimum wage). Just know that this option could backfire, causing employee dissatisfaction, which can be demonstrated by a drop in productivity or perhaps resulting in immediate resignation, potentially leaving you short-handed with staff.

Exempt Employees
Withholding pay as a disciplinary measure for exempt employees is a bit trickier. Exempt workers are not paid by the individual hour. They are typically paid for working per week, without regard to which hours were worked on which days.

An exempt employee may deem a late work arrival is offset by work completed “after hours” on weekends or evenings. That view is completely justifiable and customary for exempt employees. Docking the pay of an exempt employee risks opening the company up to a designation change on the position, converting an exempt position into one that is considered non-exempt. Changes in minimum wage and overtime pay for the position could follow. Withholding pay once from an exempt employee for arriving late or leaving early may not trigger a change, but repeated use of this tactic could very well endanger the exempt status of the position.

A weeklong suspension may get the point across to the exempt employee, and this would be permitted. However, you would be without that worker for an entire week, as he couldn’t work any hours in this approach.

Proceed With Caution
Familiarity with an employee’s exempt vs. non-exempt status and understanding the rules and regulations impacting each status is integral to wise decision making when it comes to determining how to proceed in such a situation. Exercise care in disciplinary tactics, particularly when a worker’s pay is on the line. Your goal is to guide your employee into a better work habit, not cultivate an atmosphere of negativity. Know what positively motivates your employee and focus on correcting the problem utilizing those measures.