DLSE issues opinion letter on partial-day absences

The California Division of Labor Standards Enforcement (DLSE) has issued an opinion letter stating that, although employers may not deduct from exempt employees’ salaries for partial-day absences, they may make deductions from employee leave balances in accordance with the employer’s bona fide leave policies.

Read DLSE Op. Letter 2009.11.23 at www.dir.ca.gov/dlse/opinions/2009-11-23.pdf.

Under both California law and the Fair Labor Standards Act, an exempt employee must receive his or her full salary for any week in which the employee performs any work, regardless of the number of days or hours worked, unless a specific exception applies.

One such exception permits deductions from salary when an exempt employee misses work for personal reasons, or for sickness or disability, if the deduction is made according to a bona fide plan, practice or policy of providing compensation for such sickness or disability. However, this deduction is only possible for one or more full-day absences—not partial days.

The U.S. Department of Labor has interpreted the law’s references to “compensation” to mean “salary,” not fringe benefits. Thus, the federal agency determined that employers could substitute or reduce accrued vacation or sick leave for partial-day absences as long as exempt employees received payment of their full salaries.

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Under California law, however, vacation pay is considered a form of deferred wages, not a benefit. Thus, the DLSE had taken the position that employers could not reduce an employee’s accrued vacation leave for partial-day absences.

The DLSE revised this position in light of a California Court of Appeal case, Conley v. P.G.& E., in which the court rejected that using vacation leave for partial-day absences constituted an impermissible reduction in compensation.

While the DLSE still holds that it is impermissible to deduct from a salary for partial-day absences, the new opinion letter states that the employer could deduct from leave-time balances for partial-day absences due to vacation or sickness in accordance with a bona fide plan, without causing employees to lose their exempt status.

Nevertheless, employers must compensate exempt employees their full salaries for any day during which they perform work, even if there is an insufficient amount of banked leave from which a partial-day absence could be applied.