Can I dock a worker's pay for substandard job performance or unacceptable conduct?
The short answer is Yes, but how you apply the docking of pay will depend on workers exemption status. First, remember that docking workers pay has a shaming element to it. It s not enough that the worker received a written warning for substandard job performance or inappropriate workplace conduct; on top of that, he ll have to explain to his wife and children why there s less money in this week s paycheck than there was in last week s.
The idea of docking pay and suspending employees without pay harkens back to the days of poor management-labor relations, when mistrust guided the workplace. It is far more effective today to build trust and confidence by treating adults with dignity and respect and by holding them accountable for their actions by gaining their buy-in. However, certain employers still maintain policies and practices in which unpaid suspensions are part of the progressive discipline process. If your company still adheres to these practices, be sure that you re implementing them correctly and not violating wage and hour laws.
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Nonexempt employees (i.e., those who are eligible for overtime pay) may have their wages withheld in hourly or daily increments as a punishment for poor performance or conduct. As a result, nonexempt workers may be sent home for a day or a half-day without pay. Their wages are measured in hourly increments, and you need not pay them for any time not worked.
On the other hand, exempt employees (e.g., managers) have restrictions placed on how their pay may be docked. Exempt workers need not be paid for any "workweek" in which they perform no work. That means that exempt employees must have at least one week's pay docked for a disciplinary infraction. (The one and only time that an exempt employee may have less than a full week s pay docked is when that employee violates a safety regulation that puts the safety of the plant or coworkers at risk. This is a specific, carved-out exception to the rule.)
Furthermore, if you re going to place an exempt worker on an unpaid suspension, you must make the unpaid period last (a) at least five business days (b) in the same calendar week (i.e., Monday-Friday). Those five days, in contrast, should not straddle two workweeks (for example, Thursday and Friday of one workweek and then Monday, Tuesday, and Wednesday of a second workweek). The reason? Exempt employees must be paid a full week s wages for any workweek in which they perform any work at all.
I know this sounds confusing. That's because it is. Here's what could happen to you, though, if you administer this incorrectly: If you were to place one of your managers on a three-day unpaid suspension (which is less than a full week and therefore violates this rule), that could result in the manager s exempt status being violated. In other words, the exempt manager could be considered a nonexempt employee who is entitled to overtime pay. Consequently, the Department of Labor s Wage and Hour Division could end up sticking you with a massive ''back wages assessment for overtime due your manager!
There s an easy way around the quirky wage and hour rules that govern exempt and nonexempt workers wages: Avoid unpaid disciplinary suspensions. First, they re simply too hard to administer and consequently not worth the trouble. Second, they rarely turn around underperforming employees because they generate feelings of anger and distrust. Third, there s a much better alternative.
A paid disciplinary leave, known as a ''decision-making leave'' or ''day of contemplation,'' is a once-in-a-career benefit where companies pay for an employee s time-out period. As a result, the paid leave eliminates the embarrassment so often associated with disciplinary suspensions. In addition, when you place an employee on a one-day paid leave, you have the right to ask him to complete a homework assignment on his day off. A sample homework assignment is presented in Appendix P
Is there ever a time for unpaid disciplinary suspensions? Possibly. When an employee engages in willful misconduct or egregious behavior that smacks of retaliation or harassment, a traditional unpaid suspension may be warranted. That s up to you in your discretion as management. Even so, consider the one-day paid suspension as an alternative: Guilt works better than anger, even in extreme cases.
When you re considering docking an exempt employee s pay, contact the appropriate legal counsel to ensure that you re administering this payroll issue within both federal and state guidelines.
-  See Federal Wage and Hour Laws, by R. Brian Dixon (SHRM Foundation, 1994).