Many of you wonderful people have asked me for information regarding deductions from employees who are exempt from overtime for partial or full day absences. Keep in mind that an employee will be considered to be paid on a “salary basis” for purposes of the overtime exemption if he or she receives on regularly scheduled paydays a predetermined amount constituting all or part of his or her compensation which totals at least two times the California minimum wage per month which amount is not subject to reduction because of variations in the quality or quantity of the work performed. Labor Code §§ 515(a) and (c). Except as is set forth below, an exempt employee must generally receive his or her full salary for any week in which the employee performs any work without regard to the number of days or hours worked. Failure to meet the salary test results in the employee no longer being considered exempt and an actual practice of making improper deductions demonstrates that the employer did not intend to pay employees on a salary basis. 29 CFR § 541.603(a).
“I just wasn’t feeling well!” As a general rule, no deduction may be made from the salary of an exempt employee for absences occasioned by sickness or accident unless the absence for sickness or accident exceeds a work week. However, deductions may be made for absences in increments of a full working day occasioned by sickness or disability (including industrial accidents) if the deduction is made in accordance with a bona fide plan, policy or practice of providing full compensation for loss of salary occasioned by both sickness and disability and the employee has exhausted his or her leave under the policy.
“But I worked really hard in the afternoon!” If an exempt employee performs any work during the work day, no deduction may be made from the salary of the employee as a result of what would otherwise be a “partial day absence.” However, in Conley v. PG&E (2005) 131 Cal.App.4th 260, one of the issues decided was whether an employer can deduct for partial day absences of four hours or more from an employee’s vacation pay bank, when the employee is salaried exempt. The court held that under the facts of PG&E’s vacation pay policy, where the company only deducted for absences of 4 hours per day or more, there was nothing in California law which prohibits this practice. The court noted that PG & E’s policy was entirely consistent with the California Supreme Court’s interpretation in Suastez v. Plastic Dress-Up Co. (1982) 31 Cal.3d 774, that Labor Code § 227.3 “does not purport to limit an employer’s right to control the scheduling of its employees’ vacations.” The court stated: “[c]learly, therefore, Suastez does not preclude PG & E from requiring its exempt employees to use their vacation leave, if available, when they want or need to take a partial day absence.” Id. at 263.
In a gift to California employers, in 2009 California’s Division of Labor Standards Enforcement (DLSE) took Conley a step further and indicated that deductions in hourly increments for partial day absences from a sick leave or vacation bank are permissible as long as the benefit plan permits such deductions and as long as the employee is paid his or her salary for that day. While the opinions of the DLSE do not have force of law, California courts do look to the DLSE for guidance.
Thus, if an exempt employee is absent for a portion of the work day, a California employer can deduct an equivalent number of hours from his or her PTO, vacation or sick leave bank, as appropriate. However, an employer cannot deduct this amount from his or her salary if he she works any portion of that work day. Employers should update any vacation policy to make sure that they reserves the right to schedule vacations for full or partial day absences and requiring employees to use vacation time for these purposes. The same language should be added to any sick leave policy. These deductions will not impact the employee’s exemption status as long as he or she is still paid a salary for the full day of work.
And those of you that operate outside the People’s Republic of California shouldn’t worry; this enforcement policy is consistent with that of the U.S. Department of Labor. Specifically, the U.S. Department of Labor has interpreted its regulations to allow an employer with a bona fide sick leave plan to deduct accrued leave to pay the salary obligation for “partial day” absences for illness and injury; however, the federal interpretation does not allow a deduction from the salary for such partial day absences in the event the employee’s eligibility for the leave has not yet vested or the employee has exhausted his or her leave.
Kelly O. Scott, Esq., Head of Employment Law Department
This blog is presented under protest by the law firm of Ervin Cohen & Jessup LLP. It is essentially the random thoughts and opinions of someone who lives in the trenches of the war that often is employment law–he/she may well be a little shell-shocked. So if you are thinking “woohoo, I just landed some free legal advice that will fix all my problems!”, think again. This is commentary people, a sketchy overview of some current legal issue with a dose of humor, but commentary nonetheless; as if Dennis Miller were a lawyer…and still mildly amusing. No legal advice here; you would have to pay real US currency for that (unless you are my mom, and even then there are limits). But feel free to contact us with your questions and comments—who knows, we might even answer you. And if you want to spread this stuff around, feel free to do so, but please keep it in its present form (‘cause you can’t mess with this kind of poetry). Big news: Copyright 2012. All rights reserved; yep, all of them.
If you have any questions regarding this blog or your life in general, contact Kelly O. Scott, Esq. (who else would you contact?), commander in chief of this blog and Head Honcho (official legal title) of ECJ’s Employment Law Department, at (310) 281-6348 or email@example.com.