Wage and Hour Laws FAQ
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Can I dock an employee's pay for failing to meet a production quota?
6. Can I dock an employee's pay for failing to meet a production quota?
Yes, but you might pay a big price. If an employee is exempt from the overtime rules (that is, the employee fits into an exception to the rules and is therefore not entitled to overtime pay for extra hours worked), pay docking is allowed only in limited circumstances. Generally, if you subtract money from an exempt employee's pay check based on the quality or quantity of work the employee does, the employee is no longer exempt and is entitled to earn overtime. And, if you make a regular habit of improper pay docking, you might owe overtime to every other employee in that job classification. For more information on how pay docking affects an employer's overtime obligations, see Nolo's article Legal Limits on Pay Docking and Unpaid Suspensions.
For an essential guide that shows you how to comply with the most recent workplace laws and regulations, get The Manager's Legal Handbook, by Amy DelPo and Lisa Guerin (Nolo).