Tread carefully if stripping employees of their pay

Wait, not this kind of stripping?

Stevens v. Oval Office (E.D. Wisc. 12/29/16) [hat tip: Walter Olson’s Overlawyered] poses an interesting question—is it ever permissible to dock an employee’s pay for disciplinary reasons? The fact that the plaintiffs are adult dancers docked for rule infractions such as “failing to fully remove all clothing, except for underwear, by the end of the first song when dancing on stage” doesn’t dissuade interest either.

The Stevens court denied the employer’s motion to dismiss the class action claim, concluding that the deductions fell under the definition of “defective or faulty workmanship,” for which Wisconsin’s wage payment law prohibits pay deductions without prior written authorization (which the plaintiffs had not given).

Note that the plaintiff in Stevens filed this piece of her claim under Wisconsin state law, not under the federal Fair Labor Standards Act. Indeed, the FLSA likely permits such a practice for non-exempt employees. I have grave concerns, however, as to whether it would pass muster under Ohio’s wage payment statute, which only permits paycheck deductions in certain specific circumstances, none of which on their face cover disciplinary docking.

Moreover, this practice also raises exemption issues under the FLSA. Docking an exempt employee’s pay could jeopardize one’s exempt status. The FLSA only permits an employer to disciplinarily docking an exempt employee’s pay “for penalties imposed in good faith for infractions of safety rules of major significance,” or “for unpaid disciplinary suspensions of one or more full days imposed in good faith for infractions of workplace conduct rules imposed pursuant to a written policy applicable to all employees.” Mis-docking an exempt employee’s pay puts in doubt the exempt status of that employee and any other employees in the same job classification working for the same managers. You do not want to risk an employee’s exempt status under any circumstances, for fear of owing back overtime for any hours worked in excess of 40 for all work weeks for up to two (or even three) years. Such a mistake could prove very costly.

Employers who are considering docking employees as discipline for work rule violations should not do so without having their counsel draft a carefully worded document for employees to sign that explains the penalties and authorizes the deductions from their wages. Employers should also consider the effect such a program could have on employee morale and retention.