Labor & Employment Law Daily Wrap Up, WAGE-HOUR--EXEMPTIONS—E.D. Mo.: Employee did not lose ‘exempt’ status when employer improperly docked his pay, (Oct 28, 2025)

By Ronald Miller, J.D.

The employer did not engage in an “actual practice”—that is, habitual or repeated actions—of making improper deductions.

An employer was entitled to summary judgment against an employee’s claim that after the employer improperly docked his pay for several days after he was absent, it terminated his status as a salaried employee “exempt” from overtime, ruled a federal district court in Missouri. Federal regulations state that an employer “who makes improper deductions from salary shall lose the exemption” where the employer has an “actual practice of making improper deductions.” Here, the employee’s claim failed because he presented evidence at most of isolated improper deductions affecting only him for a period of less than one month. An isolated reduction of pay for one employee for a few days did not transform the employee from a salaried employee into an employee eligible for overtime (Conners v. Environmental Operations, Inc., No. 4:23-cv-01096-JMD (E.D. Mo. Oct. 24, 2025)).

In January 2021, the employer promoted the employee to plant manager—a salaried position exempt from overtime-pay requirements. From January 12, 2021, through October 29, 2022, the employer paid the employee his applicable salary at a rate of 40 hours per week, regardless of whether he worked more or less than 40 hours. The employee admitted that he was a salaried employee up to November 2022 without “any expectation that he would be getting paid overtime.”

Deductions. In November 2022, the employer made several deductions from the employee’s pay. First, the employer docked eight hours from the pay period ending November 5 after the employee took a “personal day” because “his wife was not feeling well.” The company justified its initial deduction as a way to “handle [[his]] excessive absenteeism.” Second, for the following pay period ending November 12, the employee was paid for 24 hours despite being absent the entire week. Third, the employer paid the employee for 31.5 hours for the November 19 pay period after he worked only three days that week and listed “sick/personal” as the cause of his absence.

According to the employer, the employee’s supervisor “wanted to... dock him... because he’s out of vacation, he’s out of sick, he’s out of personal days, and he’s not showing up for work.” Payroll documents uniformly indicated that the employee had exhausted the entirety of his annual vacation by September 18 and all but one hour of his sick leave by October 16—several weeks before his November absences. According to the employee, the employer “artificially reduced” his 2022 paid leave to “tak[e] back” military leave he used in 2021.

Although the employer’s employee handbook permits deductions for improper absences, its chief financial officer barred the company from making future paycheck deductions from the employee’s salary. Thereafter, the employer then paid the employee for exactly 40 hours of work per week during all pay periods until his April 2023 termination.

Salaried status. The employee contends that when the employer docked his pay for several weeks in November, that transformed his status from a salaried employee not entitled to overtime pay to an hourly employee who is entitled to overtime pay. Thus, he asserted claims for overtime pay from November 2022 until his April 2023 termination. The employer moved for summary judgment on these counts.

Default rule. Under the FLSA’s default rule, if a company wants to maintain its exemption from paying an employee overtime, the company must pay “a predetermined amount” each pay period “not subject to reduction because of variations in the quality or quantity of the work performed.” The employee contended that the November 2022 pay deductions “destroyed [his] exempt status.”

The court observed, however, that “not all [allegedly] improper salary deductions result in the loss of the [Act’s] exemption.” Instead, federal regulations state that an employer “who makes improper deductions from salary shall lose the exemption” where the employer has an “actual practice of making improper deductions.” 29 C.F.R. § 541.603(a).

Isolated improper deductions. In this instance, the employee’s claim failed because he presented evidence at most of isolated improper deductions affecting only him for a period of less than one month. Federal regulations require systemic or widespread deductions in pay. The Tenth Circuit explained, the relevant regulations speak in the “plural” rather than the singular; they require an “actual practice”—that is, “habitual[ ]” or “repeated” conduct.

To determine whether “the employer did not intend to pay employees on a salary basis,” federal regulations require courts to consider, among other things, (1) “the number of improper deductions, particularly as compared to the number of employee infractions warranting discipline”; (2) “the time period” of occurrences; and (3) “the number... of employees whose salary was improperly reduced.” 29 C.F.R. § 541.603(a).

Because the employer did not engage in an “actual practice”—that is, habitual or repeated actions—of making improper deductions, the employee’s arguments fell short regardless of the employer’s motive for the deductions.

Safe-harbor provision. The court rejected the employee’s reliance on the safe-harbor provision in the federal regulations. The employee asserted that, “[t]o retain the employee’s nonexempt status,” the employer must show (1) that the improper deductions were “isolated or inadvertent” and (2) that the employee was “reimburse[d].” That provision states that only that reimbursement is sufficient (but not necessary) to maintain an employees’ status as exempt.

“Improper deductions that are either isolated or inadvertent will not result in loss of the exemption for any employees subject to such improper deductions, if the employer reimburses the employees for such improper deductions.” 29 C.F.R. § 541.603(c). This section merely establishes one way for employers to fix isolated or inadvertent payment mistakes to avoid any doubt about whether a company has an “actual practice” of deductions.

State-law claims. Similarly, state law claims—based on Missouri and Illinois state employment laws—also failed. Courts interpret the overtime laws of both states in line with federal law.

The case is No. 4:23-cv-01096-JMD.

Judge: Divine, J.

Attorneys: Brandy B. Barth (Newton Barth) for Gregory Conners. Patrick F. Ganninger (Lewis Rice) for Environmental Operations, Inc.

Companies: Environmental Operations, Inc.

Cases: WageHour Exemptions Overtime StateLawClaims CoverageLiability MissouriNews