What does it mean for a small business when you suspend an employee without pay?
In theory, it sounds pretty simple. An employee violates policy and the employee is disciplined. Not too complicated, right?
Not so fast.
An unpaid suspension can be viewed as a temporary removal of the employee. The key factor is determining whether the employee is exempt or non-exempt.
Exempt employees are paid on a salaried basis, regardless of hours worked. Non-exempt employees typically are paid by the hour and can be entitled to overtime pay.
There are several other distinctions between exempt employees and non-exempt employees but we'll turn our discussion to unpaid suspensions.
When an employee is exempt, unpaid suspensions are generally trickier than they can be for non-exempt employees. Generally, an employer is within his rights to suspend an employee without pay, depending on the reason for the suspension. But employers may not make improper deductions from the salary of an exempt employee.
For exempt employees, an unpaid suspension must be imposed in good faith for serious workplace violations. The FLSA lists these as drug or alcohol use, prohibited sexual harassment or other violations of federal or state rules. A suspension for quality or quantity of work is improper and may pose problems for the employer.
Employers may suspend exempt employees in full day increments only. Prior to suspending an exempt employee, however, the employer must have a written policy in place, allowing the disciplinary suspension.