An employer that can’t effectively manage her workers isn’t going to be an effective employer for long. Because of this, many employers employ punitive measures to serve as deterrents from misbehavior or unproductive habits in the workplace. One of these measures is reductions in pay rates -- either temporarily or permanently -- that are meted out as a punishment. While these maneuvers are generally legal, employers must be careful about the means in which they use them in order not to run afoul of the Fair Labor Standards Act.

Hourly Employees

The Fair Labor Standards Act allows employers a large amount of leeway to determine employees’ pay, so in most cases, punitive decreases in pay are legal. Employers must pay all hourly employees minimum wage -- $7.25 per hour as of 2012 -- for all hours worked, and must pay overtime rates of at least 150 percent of a worker’s normal wage for all hours in excess of 40 per week. Many states have higher minimum wage requirements than the national minimum wage; in this case workers must earn the higher of the two wages. As long as pay cuts for hourly employees meet minimum wage and overtime requirements, a manager is free to punitively cut wages as necessary.

Salaried Employees

Laws that govern salaried employees who qualify as FLMA-exempt workers -- those in professional and administrative functions -- are much more complex and difficult to navigate. Exempt employees must earn at least $455 per week or they lose their exempt status, and the employer is liable for back overtime. In general, exempt employees must receive their entire weekly salary if they perform any work, even if it’s only a few hours, and may not have their pay docked for petty offenses without risking their exempt status.

Punitive Reductions for Exempt Employees

The U.S. Department of Labor allows employers to impose punitive pay deduction against exempt employees only in response to violations of major safety rules that put others at risk, such as smoking in a refinery. The pay reduction must be made in good faith in the spirit of maintaining a safe work environment and not simply used as a cost cutting measure or de facto punishment for a lesser transgression. Employers may make a pay deduction for a major violation in any amount as long as it meets these criteria.

Permanent Salary Reduction

The FLSA doesn’t allow employers to reduce a salaried employee’s pay based on the quality of her work, so imposing a decrease in salary for anything other than a major safety violation risks the employee’s exempt status. Employers may make reductions in salary to exempt employees as long as they continue to make $455 each week, and the reduction is permanent. To be considered permanent, the reduction in salary must be in place for at least three months. In most cases, the reduction should be applied to an entire class of salaried workers, rather than aimed at individuals.