Exempt Employee Salary Deductions – Proceed with Caution

A blog by CalChamber 

An exempt employee took off Monday and Tuesday, worked a partial day on Wednesday and worked full days on Thursday and Friday. He has no accrued vacation time available to use. Can I deduct from his salary for the time he did not work?

To answer this question, it is important to first understand the rules regarding deductions from an exempt employee’s salary.

General Rule

As a general rule, if an exempt employee works any time during a workweek, they must be paid their full salary. That is because employees who are classified as exempt under the executive, administrative and professional exemptions in California must be paid on a salary basis, meaning they are paid the same weekly salary regardless of the number of hours worked.

Employers cannot deduct from an exempt employee’s salary for:

• Variations in hours worked or quality of work;
• Disciplinary reasons;
• Partial-week business closures or shutdowns; or
• Partial-week absences due to jury, witness, or military duty.

Full-Day Deductions

Full-day deductions from salary are allowed only in limited circumstances:

• During an employee’s first and last weeks of employment (that is, the employee can be paid for only the actual days worked in each week);
• For full-day absences for personal reasons when an employee does not have any available vacation time or paid time off (PTO) to use; and
• For full-day absences for illness if the employer has a bona fide sick leave plan and an employee does not have time available under the plan.

In the situation described above, if the employee was off for full days on Monday and Tuesday and performed no work, the employer can deduct two full days of pay from his weekly salary because he does not have any vacation time available.

These full-day salary deductions are permissible only because the employee performed no work. If he did any work during the day — such as joining a conference call or responding to emails — the employer cannot deduct from his salary, and he must be paid his full salary for the day.

No Partial-Day Salary Deductions Unless Intermittent CFRA/FMLA Leave

As explained above, if an employee performs any work in the workday, the employee must be paid their full salary for the day; that is, the employer cannot make a partial-day salary deduction.

Here, the employee worked a partial day on Wednesday so he must be paid his full salary for that day; the employer cannot deduct from his salary because he did not work a full day on Wednesday.

The only exception to that rule, which is not present in this situation, is when an employee is using intermittent leave under the federal Family and Medical Leave Act (FMLA) and/or the California Family Rights Act (CFRA).

When an employee is using intermittent leave under FMLA/CFRA, an employer may pay the employee for only the hours worked during a day that they use that type of leave.

Use of Vacation or PTO

To answer the question above, the employer must pay the exempt employee for three full days — Wednesday, Thursday and Friday — but can deduct from his salary for the full-day absences on Monday and Tuesday.

The answer to this question would have been different if the employee had vacation time or PTO available to use. If the employee had sufficient vacation to cover all the time he was out, the employer would not make any salary deductions.

Rather, the employee would have been paid his full salary for the week, and the employer could have deducted 20 hours from his vacation bank to cover the full-day absences on Monday and Tuesday (16 hours) and the half-day absence on Wednesday (4 hours).

Erika Barbara, Senior Employment Law Counsel, CalChamber