PTO and Salary Employees
Did you know employers can now deduct paid time off hours from salaried employees if they are not working their required number of hours? On March 15, 2023, in the case of Higgins v. Bayada Home Health Care Inc, a panel of three judges in the 3rd U.S. Circuit Court of Appeals unanimously ruled that it is not a federal violation to dock salaried employees’ paid time off when they do not work their required weekly hours, as long as it is not done on a discriminatory basis. Under U.S. wage law, paid time off that workers acquire is not a part of their salary. This means that if salaried workers are not meeting productivity quotas or working a full week, employers can take away their PTO. Because salaried employees cannot typically have their regular pay docked for missing partial days, this new ruling gives employers an advantage. Employers can now take missed time out of the employee’s paid time off to bring them up to a full week of pay or pay the employee their full salary and deduct the number of PTO hours they have available to use. They can even deduct PTO from salaried employees for performance-based shortcomings, poor attendance, etc. Employers do have to be careful, however, because salaried employees can become eligible for overtime if certain deductions are made from their pay, unless a union contract or employment contract states otherwise.
The panel ruled that while salary is a fixed compensation amount paid out at regular intervals, paid time off is a fringe benefit that does not have any effect on a worker’s wages. A fringe benefit is a form of compensation for the performance of services. Additional examples of fringe benefits could include health insurance, retirement plans, or family and medical leave. Employers are not required to offer fringe benefits to their employees. This also means employers are not required to pay out an employee’s accrued PTO when they quit or are terminated. Regardless of the company policy, this is no longer a requirement.
Unsure how to implement this new law into your company? Have questions about how this will work for your employees? Let the HR department at UAP help you. We consistently assist our clients with creating or changing policies. Call us today and see how we can help!