Wage deductions for exempt employee absences
Most exempt employees must receive a guaranteed salary. The employee is paid for the work performed, not the hours worked. This means an exempt employee gets paid the same amount regardless of whether s/he works 8 hours a day, or 1 hour a day. Employers that fail to pay the exempt employee’s salary risk losing the exempt status, and possibly subjecting the employer to significant overtime liabilities.
So, when can you an employer make wage deductions for exempt employee absences? There is a useful DLSE Opinion Letter on the topic, but weeding through the 13-page opinion letter and the letter that prompted the opinion is not easy. Hopefully the following provides some clarification for employers and employees regarding when an employer can make wage deductions for exempt employee absences.
Full Week Deductions are OK
If an exempt employee performs no work in a workweek for “personal reasons” and does not have vacation or PTO to cover the time off, the employer does not have to pay the employee’s salary for that week. If the employee has available accrued PTO or vacation pay, the employer can require the employee to use the available PTO/vacation. If the employee does not have sufficient PTO/vacation to cover the full week, the employer can just pay the available PTO/vacation and does not have to pay wages for the rest of the week (because the employee has performed no work).
There are a few exceptions: If an employee misses work for a protected reason, such as jury duty, attendance as a witness, or temporary military leave, the absence is not “personal” time off and therefore the employer is obligated to pay the exempt employee for the full workweek
Deductions from Vacation/Paid Time Off/Paid Sick Leave Balances
Employers can require employees to use available vacation, paid time off or paid sick leave balances before taking unpaid time off or to cover partial day, full day or full week absences. Employers should not, however, require an employee to use Paid Sick Leave under the Health Workplaces Healthy Families Act unless the absence is for one of the reasons specified in the Act.
Full Day Deductions — Personal Reasons
If an exempt employee performs no work in a workday for personal and has no accrued vacation or PTO, then the employer can deduct the equivalent of one day’s pay from the exempt employee’s salary. Caution: The employee must perform no work—this means no emailing, no phone calls. If the employee performs any work, the employer must pay the employee’s full salary.
See the exception above about absences that are not for “personal reasons.”
Partial Day Deductions — Personal Reasons
If an exempt employee works any portion of a work day, the employer must pay the employee’s full salary for that day. However, an employer can require the employee to use available vacation or PTO to cover the hours not worked. (Conley v. Pacific Gas & Electric Co., 131 Cal.App.4th 260 (2005) and Rhea v. General Atomics, 227 Cal.App.4th 1560 (2014)). The employer is not reducing the employee’s salary—it is just requiring the employee to use available PTO/vacation.
For example, if an employee works two-hours, then leaves for the day, the employer can require the employee to use 6 hours of vacation/PTO to cover the absence. The employee receives his/her full salary and therefore the employer is not making a wage deduction for exempt employee absences.
If the employee does not have available vacation or PTO, the employer cannot make a wage deduction for a partial day absence.
Full Day Deductions – Paid Sick Leave
Every California employer must provide mandatory paid sick leave (PSL) benefits as of July 1, 2015. The PSL law specifies the different reasons for taking PSL, and if an exempt employee takes a full or partial day absence under the mandatory PSL law, the employer can charge the absence against the exempt employee’s accrued mandatory paid sick time.
But what if the exempt employee does not have any more PSL? Employers can make wage deductions for exempt employee absences of one full day or more caused by sickness, an accident or a disability if the employer has a “bona fide plan, policy or practice of providing compensation salary loss due to sickness, accidents or a disability.” Since every employer is required to provide PSL, presumably every employer has a qualifying plan, policy or practice. Of course, this assumes the employer actually adopts and complies with the Healthy Workplaces Healthy Families Act.
Partial Day Deductions – Paid Sick Leave
If the exempt employee is only absent part of the day due to sickness or illness, and the employee has exhausted his/her available PSL, the employer may not deduct the remaining time from the employee’s salary. For example, if the employee works two hours, and then goes home sick, but does not have sufficient available PSL to cover the absence, the employer is still required to pay the employee for the full day.
Other times when an employer can make wage deductions for exempt employee absences
There are a few other odds and ends when an employer can make wage deductions for exempt employee absences without violating the “salary” rules:
- Employers do not have to pay the full week’s salary for the first and last weeks worked if the employee only works a partial day.
- Absences under the FMLA are specifically unpaid absences, and therefore an employer can deduct for partial-week, and possibly partial-day absences, covered under FMLA.
- If an employee is sent home for a safety-infraction, the employer may not be required to pay the full day’s or full week’s salary.
Any time you deduct money from an employee’s wages, you run the risk of violating the law. Employees who do not receive the wages they are expecting are more likely to seek outside assistance.
- Employers do not have to pay the week’s salary if no work is performed during the workweek.
- Employers may deduct for full day absences caused by “personal reasons” or if the employee takes time off for an illness and the employee has exhausted his/her available PSL.
- Employers should not dock an exempt employee’s salary for a partial day absence. If the employee does not have sufficient vacation/PTO or PSL to cover the missed partial day, the employer should pay full day’s salary.
- The employer can require an employee to use available vacation/PTO or PSL for partial day absences (the PSL minimum increment is two hours).
- Do not deduct from the employee’s PSL balance unless it is for one of the reasons specified in the Health Workplaces Healthy Families Act.
Original article by Robert E. Nuddleman of Nuddleman Law Firm, P.C.
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