Employment Law Blog

News, trends and analysis in employment law and HR

Apr 04, 2013

Deducting from PTO for Salaried Employees

Wage and Hour 

We have a salaried employee reaching the end of her PTO allotment. She has some vacation and assorted medical appointments coming up. Can we require her to accrue a negative PTO balance? Can we deduct the negative balance from her final paycheck if she leaves?

We have a salaried employee reaching the end of her PTO allotment. She has some vacation and assorted medical appointments coming up. Can we require her to accrue a negative PTO balance? Can we deduct the negative balance from her final paycheck if she leaves?

You can require her to run a negative PTO balance, as long as the practice is reflected in your written PTO policy, but you may be putting the company at risk by doing so, because you wont be able to recover the loaned PTO if she leaves employment. Under the Fair Labor Standards Act (FLSA), you can only reduce an exempt employees weekly salary under very limited circumstances. Examples of permitted reductions include those for full-day absences for personal reasons, full-day absences for sickness if the company has a bona fide plan that replaces lost salary (like PTO), or time off that is subject to the FMLA. But the Department of Labor (DOL) views deductions from salary different than deductions from PTO. So long as the weekly salary is maintained, the DOL does not have heartburn about deductions from the PTO bank, including running a negative PTO balance. However, state laws on payroll deduction do not permit you to recover the loaned PTO from her final paycheck, so if the employee leaves employment with a negative PTO balance youll be left footing the bill. For help figuring out whether your deductionsfrom salary, paid leave, or final paycheckcomply with the FLSA and state payroll deduction laws, contact your Vigilant representative.

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