Opinion letter: OK to cut hours, pay of exempt employees — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily

Opinion letter: OK to cut hours, pay of exempt employees

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A California Division of Labor Standards Enforcement opinion letter has given the green light to an increasingly common employment practice in today’s fragile economy: Cutting exempt employees’ normal workweeks and then paying them proportionately less.

Earlier this year, an employer asked the division whether—rather than laying off exempt employees—it could trim their five-day workweeks down to four, while also cutting their salaries by 20%.

The employer’s obvious concern: That doing so might destroy the employees’ exempt status.

In an opinion letter responding to the query, the division wrote, “Neither the Labor Code and Industrial Welfare Commission wage order provisions, nor the federal law upon which the pertinent provisions of California law is based, prohibits the employer described in your letter from implementing its proposed reduction in the work schedule and salary of the affected exempt employees.” 


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