Many California employers mistakenly assume they can reduce an exempt employee’s pay whenever the employee misses work. In reality, the rules are much more restrictive, and improper deductions can lead to costly wage and hour claims.
The general rule is simple: if an exempt employee performs any work during the workweek, they are generally entitled to their full weekly salary. Likewise, if an exempt employee works any part of a day, the employer generally cannot reduce the employee’s salary for the missed hours.
Salary Deductions Are Generally Not Allowed For:
- Partial-day absences (except qualifying intermittent FMLA or CFRA leave)
- Poor performance or reduced productivity
- Lack of available work or temporary business closures
- Disciplinary suspensions
- Jury duty, witness duty, or military leave during a week in which the employee performs any work
Salary Deductions May Be Allowed For:
- Full-day absences for personal reasons
- Certain full-day absences due to illness after available sick leave has been exhausted under a bona fide sick leave plan
- The first and last week of employment (prorated based on days worked)
- Qualifying intermittent FMLA or CFRA leave
One important distinction is that salary is not the same as vacation time or PTO. Although employers generally cannot reduce an exempt employee’s salary for a partial-day absence, they may deduct the missed time from the employee’s accrued vacation, PTO, or sick leave bank if permitted by law and company policy.
Because California’s salary basis rules are highly technical, even small payroll errors can create significant liability. Before reducing an exempt employee’s pay, employers should confirm with legal counsel that the deduction is permissible.
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Withrow Employment Law, PC – Practical Legal Guidance for California Employers.