This Wisdom of the Crowd, compiled from questions and responses posted on the ACC Employment & Labor Law discussion forum*, addresses whether a monetary docking policy to discourage lateness can be implemented under the US Fair Labor Standards Act (FLSA).
*Permission was received from the ACC members quoted below prior to publishing their eGroup Comments in this Wisdom of the Crowd resource.
Question:
I have a new plant manager who wants to charge exempt managers US $1.00 if they are not on time to managers meetings. I think such a policy violates the Fair Labor Standards Act (FLSA) and I drafted the email below to send to him. In running this by my Chief Financial Officer, he asked if I was aware of any case where this type of docking was found to be illegal. I looked for about an hour and didn't stumble across anything. Is anyone aware of any case where similar fines were found to be illegal? Thanks.
I wanted to follow up with you regarding the $1.00 docking policy. Unfortunately, while such policies used to be common, they are no longer consistent with the FLSA, can put all of our exempt employee classifications in jeopardy and can expose us to legal risk.
Reductions in the predetermined salary of an employee who is exempt under 29 C.F.R. 541 of the Department of Labor's regulations related to the FLSA will ordinarily cause a loss of the exemption. An employer must pay an exempt employee the full predetermined salary amount "free and clear" for any week in which the employee performs any work without regard to the number of days or hours worked. Salary deductions are generally not permissible if the employee works less than a full day. Except for certain limited exceptions found in 29 C.F.R. 541.602(b)(1)-(7), salary deductions result in loss of the section 13(a)(1) exemption.
What does that mean? If we start fining people $1.00 for being late for meetings, we put their status as an exempt employee at risk. So, a manager who typically works 50 hours a week may now have an overtime claim for 10 hours a week. While I think it is highly unlikely such would happen, I am very concerned about engaging in a practice that we know is inconsistent with the FLSA.
You can certainly write people up, lock the door at the meeting start time or find another solution but this practice runs a risk of liability for us as a company.
Wisdom of the Crowd:
Response #1: You are right on point to be concerned about this if it is a payroll deduction. If the boss wants to "fine" his subordinates a dollar and have them come up to the front of the room and put a dollar bill in the "fine box" and then donate the proceeds to charity, I doubt that you'd have a problem, but actually running it through payroll and deducting $1.00 from the paycheck could get you in a heap of trouble.1
Response #2: A possible alternate solution to consider is to firmly announce that manager meetings are mandatory will start on time and no one will be admitted after the meeting starts. Begin the meetings on time, close the door, take attendance and build attendance at manager meetings into your performance review process -- miss X meetings and lose your manager job or get a demotion.2Response #3: I agree you can't dock salary even a penny. While I think there may be better ways to instill timely attendance, you could dock annual or periodic discretionary incentive pay.3Response #4: I agree that there are concerns regarding the FLSA exemption status but I'd be more concerned about the tone and culture that would be created with this punitive policy (and is $1 really enough punishment to elicit change?). If managers' getting to meetings on time is a challenge, then setting clear expectations through coaching usually does the trick. I once had a manager who would lock the conference room door at the designated meeting time then anyone who showed up late had to knock to gain entrance and he usually made them wait a few minutes until the door was answered. A couple of meetings like that and everyone learned to show up on time.4Response #5: Have the managers set up ground rules for their meeting. If they all agree to fine each other for the tardiness and they personally select to place the dollar in the jar in the table and then the group determines how the money should be used, I do not think you will run afoul of the FLSA however. I would not formalize a policy on this and at the start of each meeting remind the managers of the ground rules.If you are really concerned require a two-option format like "sing a song" or "pay a dollar" and they then choose the payment option it is clearly voluntary. Do determine the use of the money. If it is back to the company or to an individual - BAD. If it is to a charity - GOOD. If it funds donuts for the next meeting - OK.If the tardiness continues, it really should be a performance issue.5Response #6: I would suggest that the policy could be that the lateness would be recorded and reflected in the level of the employee's bonus, if any.6
1Kevin Chapman, Associate General Counsel, Dow Jones & Company, USA (July 14, 2016).
2Anonymous Poster (July, 2016).
3Anonymous Poster (July, 2016).
4Terri Casey, SVP Compliance in HR, Physicians Partners of America, USA (July 14, 2016).
5Anonymous Poster (July, 2016).
6Gregory Peterson, General Counsel, International Council of Shopping Centers, Inc., USA (July 15, 2016).
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