It is my understanding that it is legal to require salaried employees who work less than 40 hours in a week to use vacation time to make up for the difference. What happens, though, when the employee runs out of vacation time? Is it legal for us to reduce pay? Do they accrue negative vacation time that will be deducted from their balance upon their next earning of vacation time? Can we deduct funds from a final check if an employee leaves with a negative vacation balance? What is the best way to handle those employees who are salaried and work less than 40 hours per week who also have a zero balance of vacation time?

So, if your employee is overtime exempt, you can’t base their pay on a set number of work hours each week. But, you can have a policy that sets an average workday for your organization. Let’s say 8 hours – 5 days per week. (40 hours). If Bob works X hours each day of the week, he must be paid in full for each day, but you can deduct his leave bank if he works less than 8 hours each day. If he runs out of leave, you will still be required to pay him for full days if he works any part of a day. No deductions are allowed for partial day absences. Any work performed counts. Even answering a text message or a phone call. The employee does not have to be in the office or employer’s location to work. https://www.dol.gov/whd/overtime/fs17g_salary.pdf

Now, you may choose to allow for negative accrual and then reduce the leave bank as new accruals are shown. HOWEVER, you may not deduct the portion of the negative balance which was caused by partial day absences from the final pay when the employee terminates.

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