According to Part 541 of regulations issued by the U.S. Department of Labor under the Fair Labor Standards Act, exempt employees must be paid a guaranteed salary. Under §541.602, employers may only deduct from this salary for full day absences based on reasons attributable to the employee, such as a request for unpaid vacation time. In 2004, DOL amended these rules to add exceptions (§541.602(b)(4) and (5)) that allow full-day unpaid suspensions for violation of major safety or conduct rules.

In an elaws advisory issued by DOL, the agency said “[t]his provision refers to serious misconduct, not performance or attendance issues.” What happens, however, when the unpaid suspension lasts an entire workweek? If the salaried exempt employee works no hours in the week, can employers impose unpaid suspensions on that employee for serious performance issues, such as insubordination or gross negligence of job duties?

Prior to the 2004 regulations, DOL generally took the position that if a salaried exempt employee worked no hours in a given workweek, he or she did not have to be paid the salary, regardless of the reasons why no work was performed. The 2004 rules and subsequent guidance from DOL make no mention of this issue. Based on the elaws advisory, DOL appears to rule out unpaid suspensions for performance reasons regardless of their length. §541.602(b)(5) gives the example of a permissible 12-day unpaid suspension for violation of a workplace violence policy, but again it makes no mention of full workweek suspensions for other reasons.

Employers in this situation could still argue that no salary is payable for workweeks in which no hours are worked. However, all indications from DOL since 2004 point to the agency taking the position that unpaid suspensions for reasons other than those explicitly set forth in the rules will be considered a violation of the salary rule and will subject the employer to claims for unpaid overtime.

[View source.]