Reducing Salaries When Exempt Employees are on FMLA or CFRA Leave
Employers frequently ask whether they may reduce the salary of an exempt employee who takes time off under the Family and Medical Leave Act (FMLA) or the California Family Rights Act (CFRA). As we’ve learned reducing an exempt employee’s salary can impact the employee’s exempt status. Both federal and California law allow salary reductions for employees on FMLA or CFRA leave—but only within specific limits designed to preserve the employee’s exempt status.
FMLA and Federal Regulations
Under the federal Fair Labor Standards Act (FLSA) and the FMLA regulations, employers generally cannot reduce an exempt employee’s salary based on variations in the quality or quantity of work. However, a key exception applies for absences covered by the FMLA:
“An employer is not required to pay full salary for weeks in which an exempt employee takes unpaid leave under the federal Family Medical Leave Act. Rather, when an exempt employee takes unpaid leave under the Family Medical Leave Act, an employer may pay a proportionate part of the full salary for time actually worked.”
— 29 CFR § 541.602(b)(7); cited in DLSE Opinion Letter (Nov. 23, 2009)
This allows an employer to make reductions in an exempt employee’s salary for any period of unpaid FMLA leave, including intermittent or reduced-schedule leave, without jeopardizing the individual’s exempt status.
The U.S. Court of Appeals recognized this exception in Abshire v. County of Kern, holding:
“A salaried employee is compensated not for the amount of time spent on the job, but rather for the general value of services performed.”
— 908 F.2d 483, 486 (9th Cir. 1994)
California Law and CFRA
California’s CFRA regulations closely track the FMLA regarding salary reductions for exempt employees. As provided in Cal. Code Regs. tit. 2, § 11090(e)(4):
“Employers may reduce exempt employees’ pay for CFRA intermittent leave or a reduced work schedule, provided the reduction is not inconsistent with any applicable collective bargaining agreement or employer leave policy, the FEHA, and any other applicable state or federal law.”
The California Department of Industrial Relations and the Division of Labor Standards Enforcement have affirmed this approach, recognizing that adjustments for protected leave under CFRA do not undermine exempt status.
Case Law Clarification and Regulatory Guidance
Outside of the limited context of FMLA and CFRA leave, the law remains strict. The DLSE and courts have consistently found that reductions for partial-day absences not covered by a bona fide leave law or policy (such as FMLA/CFRA) violate the salary basis test:
- Conley v. P.G. & E., 131 Cal.App.4th 260, 267 (Cal. Ct. App. 2005): “Deducting an employee’s salary for absences less than one day violates the FLSA salary basis test.”
- DLSE Opinion Letter (Nov. 23, 2009): “If an employer, in fact, docks employees’ wages improperly, then the employees do not meet the salary basis test, and are nonexempt for purposes of overtime pay.”
Practical Takeaway
Employers in California and elsewhere can lawfully reduce the salary of exempt employees for any period of unpaid leave taken under the FMLA or CFRA, including intermittent or reduced-schedule leave. This exception is codified in federal regulations (29 CFR § 541.602(b)(7)), California regulations (2 CCR § 11090(e)(4)), and is supported by interpretations from both courts and the DLSE. Employers need to ensure reductions are only for legally protected leave periods and are not inconsistent with other applicable policies or agreements.
Should an employer reduce an exempt employee’s salary outside the context of FMLA or CFRA, the employee’s exempt status will likely be lost, exposing the employer to overtime obligations. For most other situations, the exempt employee must receive a full guaranteed salary for any week in which they perform any work—even if they work only a fraction of their normal hours.[1]
Citations:
- 29 CFR § 541.602(b)(7) (Federal regulation)
- 2 CCR § 11090(e)(4) (California regulation)
- Abshire v. County of Kern, 908 F.2d 483 (9th Cir. 1994)
- Conley v. P.G. & E., 131 Cal.App.4th 260 (Cal. Ct. App. 2005)
- DLSE Opinion Letter, Nov. 23, 2009