There’s been a lot of talk in the media lately about how the prevalence of smartphones, tablets and laptop computers is changing the way we work. We know employees are likely to check email and perform other work duties from home or on the road.

Of course, this presents a problem when the employees are eligible for overtime. We are required by the Fair Labor Standards Act (FLSA) to pay hourly and non-exempt salaried employees for all the time they work — and time-and-a-half overtime if they work over 40 hours in a week.

Some employers have prohibited overtime-eligible employees from working outside of their scheduled work hours to limit this potential liability. Others find time tracking options accessible remotely (such as our AcroTime cloud-based solution) are a good alternative for making sure all employee work time is recorded no matter when or where the work is performed.

What may be more of a surprise to employers is that off-hours or remote work can also present wage and hour issues even when the employees are exempt from overtime.

Exempt Employees: Deduct With Caution

Most of us know the basic criteria for an exempt employee under the FLSA. For instance, they must have a guaranteed weekly salary of at least $455, which must be paid in any week the employee performs any compensable work. The employee’s job duties must also qualify for exemption under one of the exemption categories permitted under the FLSA.

Where employers get tripped up sometimes, though, is when it comes to deductions. Exempt employees cannot face any deductions from their pay based on the quality or quantity of their work.

Some employers may think this means they can’t ever dock an exempt employee’s pay. However, the law does spell out specific conditions where it’s acceptable to dock an exempt employee’s pay without jeopardizing their exempt status.

According to the Department of Labor, deductions from exempt employee pay are permissible under the following conditions:

  1. When an exempt employee is absent from work for one or more full days for personal reasons other than sickness or disability;
  2. For absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness;
  3. For unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions.
  4. For penalties imposed in good faith for infractions of safety rules of major significance (note: partial-day deductions are permissible here);
  5. To offset amounts employees receive as jury or witness fees, or for military pay (note that these deductions do not reduce the total amount of compensation the employee receives, as they are merely offsets of monies received from other sources);
  6. When an exempt employee is absent under the provisions of the Family Medical Leave Act (FMLA). Employees on FMLA leave only have to be paid a pro-rata portion of their salary to cover the time they actually worked.

Under certain conditions, you can deduct for a full week’s salary in conjunction with a furlough. If you need more information, the Department of Labor has prepared a list of Frequently Asked Questions related to furloughs (PDF).

Working While on Leave = Employer Headaches

Normally, an exempt employee could work from anywhere, at any time, without triggering liability for their employer. After all, they’re paid a straight salary and are not eligible for overtime. Where employers are running into trouble, though, is when they take a deduction from an exempt employee’s salary based on one of the criteria above… but the employee performs work while out of the office.

If the employee is out of the office due to reasons that only permit full day deductions, but they work during their absence, the company is required to pay them in full for each day they performed any work. Otherwise, the company has taken an illegal deduction and could find the employees reclassified as non-exempt — in which case they could also be on the hook for back overtime pay, penalties and fines.

If the employee is out of the office for one of the reasons that allow partial-day deductions (such as FMLA leave or safety violations) but they work during their absence, the company must pay them for the actual time they spent working.

For instance, the FMLA allows employers to pay workers pro-rata for the time they actually work. But if you only pay them for the time they’re working in your office you may not be paying them for all the time they’re actually working.

Consider an employee who works in the office for three days a week and takes two days off each week to obtain treatment for a serious medical condition. Under the terms of the FMLA, you can pay that employee 60% of their normal salary (32 hours working divided by a normal 40 hour week).

If, however, that employee is also working remotely for an additional two hours each day — answering emails and voicemails, dealing with paperwork, teleconferencing into meetings, etc. — you must pay them 70% of their normal salary (36 hours working divided by a normal 40 hour week) or you’re in violation of the FMLA.

Out on Leave? No Work for You!

To reduce this potential liability, experts advise you to have in place a policy prohibiting employees from working at all while on leave or furlough. You will still have to pay people for the time they work if they violate the rule, but you are also permitted to institute disciplinary proceedings for violation of company policy. Be sure employees are aware of this policy, and enforce the rule even-handedly for all employees.

As an alternative, convert exempt employees to hourly status while they’re on leave. Have them track their time spent working, whether in the office or remotely. You then pay them for the time they have actually worked at their equivalent hourly rate. Just be sure you pay time-and-a-half overtime if they work more than 40 hours in a work week while they’re classified as hourly.

You can re-classify them as exempt and return them to a salary basis when they return to work full time.

Because at least some of their work time may take place off-premises, a cloud-based time-tracking solution such as AcroTime could be ideal. With AcroTime, employees can clock in and out from any location and any time they’re working: using a smartphone, any laptop, PC or tablet with an Internet connection, or even (if you’ve enabled this option) a standard telephone.

(Of course, it’s a Best Practice to track all employee work time anyway, no matter what their classification.)

With a bit of vigilance, some sensible rules and a good time tracking system, you can rest easy your exempt employees are being paid properly, no matter where they’re working.