Can we dock an employee’s pay as a form of discipline?

You can do this in certain cases, but the practice is not recommended. State laws place severe restrictions on allowable deductions from wages. In most states, you need the employee’s signed authorization for a deduction, so an employee’s simple refusal to sign an authorization may prohibit the deduction. Since the authorization often must be voluntarily provided, the practice may not be an effective form of discipline.

For exempt employees, federal law allows for salary deductions in specific cases, though state requirements may still apply (like the need for signed authorization). You can also make deductions from an exempt employee’s salary for unpaid disciplinary suspensions of one or more full days imposed in good faith for infractions of workplace conduct rules. Suspensions must be imposed as required by a written policy applicable to all employees.