The Fair Labor Standards Act (FLSA) is a federal statute that establishes minimum wage and overtime pay requirements for employees in the private sector and in federal, state, and local governments who work for employers that are covered by the FLSA. The FLSA makes an important distinction between (1) employees who are classified as nonexempt workers (generally hourly workers) and are entitled to at least the current minimum wage and overtime pay at a rate not less than one and one-half times the regular rate of pay after 40 hours of work in a workweek; and (2) employees who are classified as exempt workers (generally executive, professional, and salaried workers) who are not entitled to a minimum wage or overtime pay regardless of the number of hours they work.
An employee who is nonexempt and paid hourly generally must clock-in at the beginning of the workday and clock-out at the end of the workday—and if the employee is late to work or leaves early, the employee’s pay is automatically docked by virtue of the reduced time on the clock. But if an exempt employee is late to work or leaves early for any reason, the employer may not dock the exempt employee’s pay. But the employer can discipline, fire, or demote the exempt employee, or dock the exempt employee’s vacation time or paid time off (PTO) and force the exempt employee to use that PTO to cover the hours away from work.
There are some exceptions to this rule—for example, an employer may dock an exempt employee’s pay when (1) an exempt employee is absent from work for one or more full days (not partial days) for personal reasons other than sickness or accident, or (2) the employee is absent for one or more full days and the employer has an established benefit plan that covers salary for absences due to personal reasons, sickness, or accident, and the employee has used their available paid time. Other exceptions—such as disciplinary suspensions and workplace safety violations—may apply and allow the employer to dock the pay of an exempt employee.
If an employer improperly docks the pay of an exempt employee, the employer may lose its FLSA exemption for that employee and be required to pay overtime wages for all hours worked by that employee during the previous two years, and for all future overtime hours worked by that employee.
The FLSA is in the United States Code, at 29 U.S.C. §201. And the relevant rules and regulations are in the Code of Federal Regulations, at 29 C.F.R. §510 to 29 C.F.R. §794.