Employers May Deduct From Exempt Employee Leave Banks for Partial Days
California's Division of Labor Standards Enforcement recently issued a new Opinion Letter holding that partial day deductions from vacation or sick leave accruals for exempt employees whoare absent for a partial day are permissible under California law and do not cause the loss of exempt status for such employees. In addition, the Opinion Letter makes it clear that employers may deduct leave in less than four hour increments from sick leave and vacation banks. The Opinion Letternotes that in Conley v. PG&E, 131 Cal.App.4th 260 (2005), the court approved partial day leave bank deductions in four hour increments. However, the Opinion Letter explains that neither Conley, nor any California or federal regulationprecludes deductions from vacation or sick leave banks in increments of less than four hours.
The Opinion Letter cautions that although it is permissible to dock an exempt employee's leave bank for a partial day absence, itis notpermissible to dock an exempt employee's salary for a partial day absence. Exempt employees are entitled to a full day's salary for any day in which they perform work. Therefore, an exempt employeewho has no vacation or sick leave may not be monetarily affected if that employee takes a partial day off.
While the Labor Commissioner's Opinion Letter is limited to the facts and circumstances described in the employer's request, all California employers can draw guidance, more comfort and direction, when faced with exempt employees taking partial days off of work for personal reasons or due to sickness or the illness of their family members. The new guidance on the subject is consistent with federal law and provides employers more flexibility in making necessary deductions from exempt employees' vacation and sick leave banks during tough economic times to minimize the potential vacation pay paid out to employees at separation.