Ask the Expert: Can Time Increments Play a Role in Company PTO Policies?
Question: What’s the minimum amount of time we can require exempt employees to use their paid time off (PTO)? Under our benefits policy, a half day (four-hour deductions) for exempt employees is usually OK, and our nonexempt employees can take PTO one hour at a time, but could we require a similar two-hour increment for exempt employees, as well?
Answer: Neither the Fair Labor Standards Act (FLSA) nor Idaho law includes a specific provision requiring time-specific increments of PTO for exempt employees. However, regardless of the increments permitted under your benefits policy, the salary basis requirement under the FLSA must always be met.
The salary basis provision requires full compensation in the predetermined amount for weeks in which any work is performed by the exempt employee and prohibits reductions from that pay unless covered by a specific exception. One such exception is for full-day absences unrelated to sickness or disability. Tracking PTO use isn’t covered by these same restrictions and can be reduced in any time increments to account for absences from work, full day or not.
So long as exempt employees continue to receive the guaranteed salary, the PTO bank can continue to be reduced per the employer’s benefits policy. However, it’s when an exempt employee’s accrued PTO runs out when an issue with the salary basis may arise and when a company may ultimately decide a benefits plan should only allow exempt PTO in full-day or half-day increments.
Under these circumstances, if the exempt employee has run out of the accrued PTO and is absent for less than a full day, the pay can’t be reduced to account for no available PTO, and the employer must pay the entire guaranteed salary. Granted, the employer is still permitted to discipline the employee or deduct time from future PTO, but it may not reduce the paycheck for absences that are less than a day without jeopardizing the employee’s exempt status.
Jason R. Mau is a shareholder in the Boise office of Parsons Behle & Latimer. He can be reached at jmau@parsonsbehle.com.
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