Deducting partial-day absences of exempt employees from leave balances
STATE OF CALIFORNIA Arnold SchwarzclIcggcr, GOllerl/OJ'
DEPARTMENT OF INDDSTRlAL RELATIONS
DIVISION OF LABOR STANDARDS ENFORCEMENT
455 Golden Gate Avellue, 91h Floor
San FI'allcisco, California 94102
(415) 703-4863
(415) 703-4806 fax
ANGELA BRADSTREE1; STATE LABOR COMMISSIONER
ROBERT R. ROGINSON
Chief Coullsel
November 23,2009
Mary Cheung, Human Resources Director
Asian American Recovery Services, Inc.
1115 Mission Road
South San Francisco, California 94080
Re: Deductions for Partial and Full Day Absences ofExempt Employees
Dear Ms. Cheung:
This responds to your letter dated October 22, 2008, requesting an opinion fi'om this office
regarding pennissible deductions due to partial day absences for vacation and sick leave taken by
exempt employees based upon your company's ("Company") policies for accmed or banked
vacation and sick leave.
In your letter, you set forth a series of scenarios positing different reductions in both sick
leave and vacation balances for full or partial day absences and inquire whether the reductions are
permissible under California law. It is the opinion ofthe Division of Labor Standards Enforcement
(DLSE) that while it is impermissible to deduct fi'om a salary of an exempt employee for patiial
day absences, the deductions from leave balatlces in connection with patiia1 day absences due to
vacation or sickness proposed in the Company's scenarios do not, in most scenarios presented in
your letter, violate California law nor do such deductions cause the loss of an employee's exempt
status. Each scenario is addressed individually below.
Factual Backgrollnd
Your letter generally describes the Company's vacation and sick leave policies. Under the
Company's policy, vacation leave is accrued by employees and is to be used for absences based
upon any personal reasons including a vacation break, preparing for school exatninations, and for
absences due to illness (when there is no sick leave accmed or banked). Unused vacation is paid
out to the employees upon separation from the Company. The Company policy also provides for
the accrual of sick leave which employees subsequently use for absences due to illness, attending
doctor's appointments, or providing medical care for family members. Unused sick leave is not
paid out to employees upon separation. All accmed sick leave (except when requested leave is not
related to illness) and vacation must be exhausted before any unpaid leave of absence is approved.
In subsequent telephone discussions with this office, you confinned that the Company's vacation
policy requires that an employee use his or her vacation hours for illness when he or she does not
have any sick leave accrued.
Letter to Mary Cheung
November 23,2009
Page 2
You state your understanding of the Labor Commissioner's policies regarding deductions
for partial day absences of exempt employees as allowing for deductions fi'om accrued vacation
and sick leave as follows: fi'om deductions for personal reasons provided it is for 4 or more hours
absence in a work day and there is vacation accmed and fi'om sick leave (any hom) for illness as
long as there is sick leave. You then pose several scenarios based upon two general categories of
reasons for absences: time off for personal reasons (vacation) and time off for illness, with various
scenarios from partial day to full day absences and varying available vacation and sick leave
balances. In subsequent telephone discussions with this office, you also confinned that a full day's
work consists of 8 hours, that none of the various scenarios presented involves absences of less
than 3 homs, and that deductions are not planned for absences that are less than 3 hours.
Before addressing the scenarios in your letter, the general principles for allowing for
deductions for absences of exempt employees must be reviewed in order to place the scenarios and
analysis in context, which will assist in understanding the scope and limitations for allowing such
deductions.
One of the hallmarks for exempt status under both the federal Fair Labor Standards Act
(FLSA) and Califomia law which relieves an employer from overtime compensation requirements
is that an employee must satisfy both a "salmy" test and an applicable "duties" test (executive,
administrative, or professional). Your inquiIy addresses the impact on the salary test when ml
employer makes deductions for partial and full day absences, and accordingly this letter addresses
only the salary test requirements.
The Salary Basis Test
Under California law, an employee must earn a monthly salmy equivalent to no less than
two times the state minimum wage for full-time employment. (Labor Code §§ 515(30) and (c).)
While there are several differences between the federal and state salary requirements (e.g.
minimum dollar amounts), the DLSE follows the general federal interpretations under the FLSA
salary basis test with respect to allowable· deductions for absences to the extent there is no
inconsistency with specific provisions in the Labor Code or IWC Orders. (DLSE Enforcement
Policies and Interpretations Manual (June 2002) [hereafter "DLSE Manual"], §§ 51.6.4 and 51.6.6;
DLSE Opinion Letter 2002.03.01 [the salmy requirements of state law are generally consistent
with the federal "salmy basis" regulations set forth in 29 CFR § 541.118 (now § 541.602),
including DLSE's enforcement position regarding deductions from salaries].)
All employee will be considered to be paid on a "salary basis" for purposes ofthe overtime
exemption if he or she receives on regularly scheduled paydays a predetermined amount
constituting all or part of his or her compensation which totals at least two times the California
minimum wage per month which amount is not subject to reduction because of variations in the
quality or quantity ofthe work performed. An exempt employee must receive his or her full salmy
for any week in which the employee performs any work without regard to the number of days or
hours worked. (DLSE Manual § 51.6.8-51.6.9; 29 CFR §541.602(a).) Failme to meet the salary
test results in the employee no longer being considered exempt and an actual practice of making
Letter to Mary Cheung
November 23, 2009
Page 3
improper deductions demonstrates that the employer did not intend to pay employees on a salaIy
basis. (29 CFR§ 541.603(a),)
The prohibition against deductions ii-OlD an employee's wages under the salmy requirement
is subject to several exceptions stated in 29 CFR § 541.602(b). The exceptions include and allow
for deductions from pay when an exempt employee is absent from work for one or mote full days
for personal reasons other than sickness or disability (29 CFR § 541.602(b)(1); DLSE Manual §
51.6,14,3.) and for absences of one or more full days occasioned by sickness or disability
(including work-related accidents) if the deduction is made from a bona fide plan, practice, or
policy of providing compensation for such siclmess or disability (29 CFR § 541.602(b)(2); DLSE
Manual § 51.6.15.2.) The clear language in these referenced federal regulations allows for
deductions from a salaIy Ol,ly in increments of one full day. I
A corollary to the above recognized by the comts and the federal DepaItment of Labor
(DOL) is that an exempt employee's salary cannot be subject to reduction for absences less than a
full day under the above stated federally recognized exceptions. (See Abshire v. County of Kern,
908 F.2d 483, cert denied, 498 U.S, 1068 (1991) [deducting an employee's salary for absences less
than one day violates FLSA salmy basis test]; Conley v. P.G.& E. (2005) 131 Cal.AppAth 260,
267; DOL Opinion Letter FLSA2007-6 (FebruaIY 8, 2007) [partial day absences not expressly
recognized by PaIt 541 regulations may render an employee's compensation not on,a salary basis,
thereby jeopardizing exempt status].) For example, the regulation for absences for personal
reasons states:
Thus, if an employee is absent for two full days to handle personal
affairs, the employee's salaried status will not be affected if
deductions are made from the salary for two-full day absences.
However, if an exempt employee is absent for one-and-a-ha1f days
for personal reasons, the employer can deduct only for the one full-
, day absence,
(29 CFR § 541.602(b)(1); see also DOL Opinion Letter FLSA2005-7 (January 7,2005).)
A California court noted that the combined effect of the federal regulations (29 CFR §
541.602(a) and (b)(1)) is to "preclude employers from docking the pay of an employee for an
absence ofless than a day (a partial day absence)," (Conley 11, P. G. & E., supra, 131 Cal.AppAth at
I A different mle applies for h'eatment of absences dne to unpaid leave under the federal Family Medical Leave Act
(FMLA) and its effect on the salary basis test for exempt employees, "An employer is not reqnired to pay full salary
for weeks in which an exempt employee takes unpaid leave under the federal Family Medical Leave Act. Rather, when
an exempt employee takes unpaid leave under the Family Medical Leave Act, an employer may pay a proportionate
part of the full salary for time actually worked." (29 CFR § 602(b)(7).) The DLSE recognizes that"adjnstments in
compensation and/or benefits are pennissible where other statutOly requirements are met, such as the family and
medical l1lles that provide eligible employees with flexibility they need to take leaves on a "reduced leave" or
"intermittent leave basis." (DLSE Opinion Letter 2002,03,01, p, 7,) The DLSE views both the FMLA and California
Family Rights Act (CFRA) as enactments covered in29 CFR § 602(b)(7),
Letter to Mary Cheung
November 23, 2009
Page 4
p, 267 [footnote omitted]l Thus, intel1Jreting these federalmles to allow deduction from a salary
for a pattial day absence by an exempt employee would plainly contravene the hallmark
characteristic of the salary test, namely that exempt employees receive a predetermined amount of
compensation not subject to reduction because of variations in the quality or quantity of work
performed, If an employer, in fact, docks employees' wages improperly, "then the employees do
not meet the salary basis test, and are nonexempt for purposes of overtime pay," (Conley, supra,
131 CaLAppAth at p, 267,)
Thus, when either of the two exceptions described in 29 CFR § 541.602(b)(1 )-(2) are
satisfied, an employer is allowed to make full day deductions fi'om pay without the employee
losing his or her exempt status,
Deductionsfi'o11l Leave Banks
The above general mles regarding the salary basis test are often confused with and
misapplied to a related but different rule applicable to deductions fi'om leave balances for partial
day absences of exempt employees under the FLSA. Your letter addresses the latter mle but the
former rule is implicated insofar as it still preserves an exempt employee's right to full day
compensation even for a partial day absence, as explained more fully below,
As previously stated, the general rule under the FLSA is that an employee will be
considered paid on a "salary basis" if the employee regularly receives each pay period on a weekly
or less frequent basis, "a predetermined amount constituting all or part of the employee's
compensation, which amount is not subject to reduction because of variations in the quality or
quantity of the work performed," (29 CFR § 541.602(a), emphasis added,) Federal courts
interpreting this langnage have fonnd that "compensation" atld "amount" in the regulation refers to
"salary" and not paid leave time or fringe benefits, and thus, a reduction in paid leave time does not
affect the employee's status as a salaried employee, (Barner v City of Novato (9 1h Cir. 1994) 17
F.3d 1256, 1261c1262 [deductions from accumulated paid leave time does not result in loss of
exemption]; see also Webster v, Public School Employees of Washington, Inc, (9 1h Cir. 2001) 247
F.3d 910, 917 [extending Barner to apply to deductions where the accumulated leave is convertible
to cash].)3
The DOL has further illuminated the effect of the federal interpretations with respect to
partial day absences as follows:
2 Prior to August 24, 2004, when the referenced federal regulations were revised and renumbered as currently cited, the
language now contained was previously in 29 CFR § 541.118, The revisions did not substantively amend the two
federall'egulatory exceptions discussed in this leiter allowing for deductions under the salmy basis test.
3 According to the court in Webster, the rule alU10unced in Barner is not restricted to public employees, i.e:, is
applicable to private sector employment. Since Barner, deductions of pay for partial day absences under certain
circumstances due to personal reasons, sickness or disability without rendering public employees nonexempt are now
specified in 29 CFR § 541.710, effective Augnst 23, 2004, For this reason, the analysis here is limited to deductions
for absences in private sector employment. (See DOL Opinion Letter FLSA2005-16 (April I 1,2005),)
Letter to Mary Cheung
November 23, 2009
Page 5
Where an employer has a bona fide benefits plan (e.g. vacation time,
sick leave), it is pe1111issible to substitute or reduce the acclUed leave
in the plan for the time an exempt employee is absent from work,
whether the absence is a partial or full day, without affecting the
salary basis of payment, if the employee nevertheless receives
payment of his or her guaranteed salary. Where the employee's
absence is. for less than a full day, payment of the employee's
guaranteed salary must be made, even if an employee has no acclUed
benefits in the leave plan and the account has a negative balance.
(DOL Opinion Letter FLSA2006-32 (September 14, 2006), emphasis added; see also DOL
Opinion Letter FLSA2005-7 (January 7, 2005).)
It must be noted that in California, vacation is afforded the status of a type of deferred
compensation which is a wage and not a benefit as characterized by the DOL. (See Suastez v.
Plastic Dress-Up Co. (1982) 31 Ca1.3d 774.) In Conley, however, which involved a vacation leave
policy implemented by the utility, PO & E, the California Court of Appeal specifically addressed
the issue of deductions from an employee's vacation leave bank for paltial days absences and
concluded "that nothing in California law precludes an employer fi'Om following the established
federal policy pennitting employers to deduct from exempt employees' vacation leave, when
available, on account ofpaltial-day absences from work." (Conley, supra, 131 Cal.AppAth at p.
263.) The court noted that the exemption issue in the case presented one of first impression wlder
California law. The court rejected the contention that an employer that requires its employees who
have not exhausted their vacation leave to apply that leave to partial day absences constituted an
impermissible reduction in the amount of compensation they receive based upon the quantity of
work they perf01111. The cowt further rejected the contention that the practice specifically violates
the employees' right to vacation pay under Suastez.
Although the federal salary basis test may require PO & E to give
exempt employees additional time off for pmtial-day absences after
they exhaust their vacation leave banks, under PO & E's vacation
leave policy, PO & E's exempt employees do in fact receive all of the
paid time off they have earned-they must simply use that accrued
vacation time to make up for partial-day absences. In other words,
because the deductions made from vacation leave barucs of exempt
employees represent days on which those employees have, in fact,
taken at least fout hours off work, PO& E's vacation leave policy
neither imposes a forfeiture nor operates to prevent vacation pay
from vesting as it is earned. All it does do is regulate the timing of
exempt employees' use of their vacation time, by requiring them to
use it when they want or need to be absent from work for four or
more hours in a single day.
(Conley, supra, 131 Cal.AppA th at p. 270, underlined emphasis added; italic emphasis in original.)
Letter to Mary Cheung
November 23, 2009
Page 6
The court noted that PG & E's policy was entirely consistent with the California Supreme
COUlt's interpretation in Suastez, that Labor Code § 227.3 "does not purport to limit an employer's
right to control the scheduling of its employees' vacations. [Citations.]." The COUlt stated:
"[c]Iearly, therefore, Suastez does not preclude PG & E fi-om requiring its exempt employees to
use their vacation leave, if available, when they want or need to take a pmtial day absence." (Id.;
second italics added for emphasis)
Conley addressed only deductions £i'om a vacation leave bank for a partial day absence for
four or more hours and expressly stated that it did not intend to include an absence of less than four
hours which was based upon PG & E's express vacation leave policy of making deductions from
exempt employees' vacation bartlcs for partial day absences. (Conley, supra, 131 Cal.App.4th at p.
267, fn. 6.) We read the court's statement of limitation as based upon the employer's dednction
policy under the facts of the case at issue and not as establishing a limitation for allowing only such
deductions to partial day absences of four or more hours. Indeed, our research has not revealed any
federal standard or policy which states a "four or more hours" limitation exists for such deductions.
. We further note that although the courts treat vacation similar to a sick plan for purposes of
determining or maintaining exempt status when making deductions for full day or partial day
absences, any vacation policy or sick leave plan which is used as a basis for reduction of leave
balances will be subject to review under state law requirements for determining the validity of such
plans. Thus, the DLSE continues to view vacation plans under the Califomia Supreme COUlt'S
discussion in Suastez and does not read Conley as diminishing the statns of accrued vacation as
"wages" under Labor Code § 227.3.
Although the federal regulations make a clear distinction between absences due to personal
reasons other than sickness or disability with absences occasioned by sickness or disability, the
DOL views a "bona fide benefits plan" to include vacation time or sick leave. (See DOL Opinion
Letters FLSA2006-32 (SejJtember 14, 2006), FLSA2007-6 (February 8, 2007) and FLSA2009-18
(January 16, 2009).) When reviewing any dednctions £i'om a vacation leave balance, DLSE
reviews the matter to determine whether it is made in accordance with a bona fide plan, practice or
policy of providing compensation for loss of salary occasioned by such absence. (Conley, supra,
[employer's express policy (vacation policy) requiring deductions from vacation leave bartlcs for
partial days absences reviewed and determined as consistent with Suastez and not violative of
federal salary basis test.].)
Additionally, an employer remains, as always, obligated to compensate the employee with
his guaranteed salary for any day in which the employee performs work, even in the absence of a
sufficient amount of banked vacation leave £i"Oln which a deduction for a partial day absence can
be applied. This is a necessary consequence due to the general prohibition under the salmy test
that precludes docking an exempt employee's compensation based upon variations in the quantity
of work (29 CFR § 541.602(a)) as well as the exceptions which allow only for full day reductions
of compensation (and by implication, precludes partial compensation for less than a full day
worked) as a result of an absence due to personal reasons such as vacation ar1d for sickness or
illness. (29 CFR § 541.602(b)(I)-(2).) This view is consistent with DOL's interpretation of the
FLSA's regulations that "[w]here the employee's absence is for less than a full day, payment of the
Letter to MaJy Cheung
November 23, 2009
Page 7
employee's guaranteed salary must be made, even if an employee has no accmed benefits in the
leave plan and the account has a negative balance." (DOL Opinion Letter FLSA2006-32
(September 14,2006).)
Accordingly, while it is impermissible to deduct ji-om a salary for partial day absences, the
Company may deduct from leave time balances in connection with absences due to vacation or
siclmess of less than a full day under a bona fide plan providing for such leaves without the
employee losing his or her exempt status.
Application to Specific Scenarios
Based upon the above analysis of the law, we turn to the scenarios raised in your letter.
Preliminarily, several of the scenarios described in your letter reduce both sick leave and
vacation leave balances for full or partial day absences. The Company has separately defined
vacation and sick leave plans which we assume for purposes of this letter only are bona fide plans
with accmal and established criteria regarding their use. Under the vacation plan, an employee
must use vacation leave when there is unavailable sick leave. Our research has not revealed any
prohibition against combining the two types of leave for a single partial day absence. What is
critical is that the underlying policy and express requirements of the salary basis test are not
undermined or contravened by the reductions from respective leave banks. Accordingly, the DLSE
will be concemed where the deductions fl:om both plans for a single partial day absence are used in
a manner which contravenes the underlying salaJy basis requirements previously discussed,
including any practice which is inconsistent with or contravenes the tenns of the respective plans.
Federal law recognizes arid prescribes guidelines for the use of vacation and sick leave plans to
compensate for absences. The Company's combined use of such leave balances in accordance
with the described plans, by itself, does not appear to contravene the policies underlying the salaJy
basis test.
Full Dav Absences and No Applicable Leave Available
In described Scenario AI, the employee takes 8 hours off (full day) for personal reasons
and has the following leave balances: 5 hours of sick leave and 0 hours of vacation. The
Company's recommended action is that the 8 hours is unpaid because the employer can deduct pay
for a full day absence when no vacation is accrued. h1 Scenario Bl, the employee takes 8 hours
off due to illness and has 0 balances for both sick leave and vacation. The CompaJ1Y's
recommended action is that the 8 hours is also unpaid due to a full day of absence with no
respective sick leave or vacation balances which can be applied for the type of absence.
These scenarios are subject to the exceptions (stated in 29 CFR § 541.602(b)(I)-(2» to the
general rule prohibiting the rednction from the gnaranteed salary. The regulation expressly
provides that deductions fi'om pay may be made when an exempt employee is absent fi'om work for
one or more fnll days for personal reasons. (29 CFR § 541.602(b)(1).) The regulation also
expressly allows for fnll day deductions fi'om pay due to siclmess "if it is made in accordance with
a bona fide plan, policy or practice of providing compensation for loss of salary occasioned by
Letter to Mary Cheung
November 23, 2009
Page 8
snch sickness" and "the employer is not required to pay for any portion of the salary for full-day
absences for which the employee receives compensation under the plan..." (29 CFR §
541.602(b)(2).) Additionally, the regulation also expressly allows for deductions fi'om pay for full
day absences where the employee has not yet qnalified under the plan, or after the employee has
exhausted his or her leave allowance.
Thns, if no leave is accrued or available for deduction for vacation (Scenario AI) or illness
(Scenario BI), the Company may deduct from pay for a full day with no adverse effect on the
employee's exempt status.
Full Dav Absences And There Is Sufficient Leave Balance
In Scenario A2, the employee takes 8 hours (full day) off for personal reasons and has 5
hours of sick leave and 8 hours of vacation. The Company's recommended action is that 8 hours
be paid through deduction of 8 hours fi'om accrued vacation leave.
When no work is performed by the employee for the entire day and there is sufficient
applicable leave balance to apply for the type of absence (in this case, vacation), the Company's
payment through a deduction from available vacation leave sufficient to cover the full day is
compliant with the federal regulations and expressly authorized in the DOL opinion letters.
Similarly, in Scenario B2, the employee takes 8 hours (full day) off due to illness, and has
ohours of sick leave and 8 hours of accmed vacation. The Company recommends that 8 hours be
paid through reduction of 8 hours of vacation based upon the Compffi1y's policy allowing ffi1
employee to use accrued vacation when no sick leave is accrued and requiring that an employee
exhaust vacation prior to taking unpaid . leave. Since the Company's specific vacation plan
provides that vacation leave must be used when there is no sick leave balance available (e.g. has
not accrued or has been exhausted), the Company may deduct from the vacation leave to apply for
the full day absence due to illness.
The same analysis applies to Scenario B3 where the employee takes 8 hours off dne to
illness and has 4 hours of available sick leave and 6 hours of accmed vacation leave. The
Company's recommended action is that 4 hours be paid through reduction in available sick leave
balance ffild 4 hours paid tlu'ough reduction fi'om vacation since the Company's policy allows
vacation to be used for absences due to illness when there is no sick leave available. This action is
permitted for reasons conceptually similar to Scenario B2 with the exception that there is available
sick leave (4 hours) applied prior to applying vacation for the absence due to illness.
In each of the above scenarios, employees receive the equivalent of their guaranteed salary
for the full day absence which is in accord with the DOL's interpretation as authorized by the
federal regulation that DLSE follows for purposes of enforcing the State's salary basis test for
exempt employees.
Letter to Mary Cheung
November 23, 2009
Page 9
Full Dav Absences And Thcre Is Insufficient Leave Balance
In Scenario A3, the employee takes 8 hours off for personal reasons and has 5 hours of
sick leave and 2 hours of accrued vacation. The Company's recommended action is that 2 hours be
paid through deduction of available vacation leave and 6 hours is unpaid for the balance of the
complete day off.
Under these circumstances an employer may make a deduction limn the exempt
employee's salary because the employee is absent from work for one or more full days for personal
reasons, other than sic1mess or disability. (29 CFR § 541.602(b)(1); DLSE Manual, §§ 51.6.14.3.)
Thus, the Company is not precluded from making a full day deduction from the salary.
The regulation does not expressly address nor prohibit the deduction of any available leave
banle for such full day absences for personal reasons. In an opinion letter issued in 1999 by the
DOL's Office of Enforcement Policy Fair Labor Standards Team, the DOL addressed the scenario
of an exempt employee who takes a day off for personal reasons, but the employee has only
enough leave time to cover pmt of that day. (See DOL Opinion Letter dated May 27, 1999 (1999
WL 1002408).) The DOL stated "[w]here an employer has proposed a bona fide benefits plan, it is
permissible to substitute or reduce the accrued leave in the plan for the time an employee is absent
from work even if it is less than a full day without affecting the salary basis of payment, if by
substituting or reducing such leave the employee receives in payment an amount equal to his/her
gum'anteed salary,,,4 The DOL opined, however, that if the employee is absent for a full day for
personal reasons and there is only enough leave credit to cover a pmtion of the hours, "the
employer may deduct [fi'om the salary] fi'om the employee for the remainder of that day without
jeopardizing the exempt statl1s of the employee," (Id.) Accordingly, for Scenario A3, the
Company may deduct from the employee's salary due to the full absence for personal reasons and
the exempt status of the employee is not jeopardized by paying the employee the two hours of
available vacation leave and not paying the employee any salary for the remainder of the day.
In Scenario B4, the employee takes 8 hours off due to illness and has 5 hours of available
'sick leave and 2 hours of vacation. The Compmw's recommended action is that the employee be
paid through 5 hours deduction from sick leave, 2 hours tlu'ough deduction of available vacation,
and I hour is unpaid. Under the federal regulation and DOL interpretation, deductions from pay
are allowed only for a full day absence due to siclmess or disability if the deduction is made in
accordance with a plan or policy of providing compensation for loss of salary occasioned by the
absence due to personal reasons (vacation) or sickness. Moreover, the regulation also provides:
The employer is not required to pay any portion of the employee's salary
for full-day absences for which the employee receives compensation under
the plan, policy or practice. Deductions from such full-day absences also
may be made before the employee has qualified under the plan, policy or
practice and after the employee has exhausted the leave allowance
thereunder." (29 CFR §541.602(b)(2).)
4 See also DOL Opinion Letters FLSA2005-7 (January 7,2005) and FLSA2006-32 (September 14, 2006),
Letter to Mary Cheung
November 23, 2009
Page 10
Here, the leave allowances are not exhausted and are insufficient to cover the full day
absence. As previously explained, however, DOL allows for reductions ii'OlTI available leave
balances for partial and full day absences under a bona fide plan without affecting the salmy basis
of payment if the employee nevertheless receives payment of his or her guaranteed salmy. It
follows ii'om this language that although there is insufficient leave to account for the fe\ll day
absence, the Company may deduct (reduce) from the applicable leave balance (in order to exhaust
the leave) so long as the employee receives payment in an amount equal to the guaranteed salaly
and doing so does not affect the employee's exempt status.
Accordingly, the Company may deduct ii'om the available leave balances, including
vacation which can be applied if sick leave is exhausted under COmpal1Y's policy but the Company
camlOt reduce the employees pay for the 1 hour.
Partial Dar Absences For Personal Reasons
Although not indicated in your letter, your vacation and sick leave practice appeal's to
account for one-hour increments for applying deductions ii'om leave balances. Federal regulation
expressly allows an employer to use "the hourly or daily equivalent of the employee's full weekly
salary or any other amount proportional to the time actually missed by the employee" when
calculating the amount of deduction ii'om pay allowed under 29 CFR § 541.602(b). (29 CFR §
541.602(c))(emphasis added). The DOL also has found that leave deductions under an employer
policy for pm·tial day absences in half-day increments do not violate the salmy basis requirement.
(See DOL Opinion Letters dated December 4, 1998 (1998 WL 1147739) [PTO policy] and
FLSA2006-32 (September 14, 2006) [vacation leaveJ.) California law is in accord. (Conley,
supra, 131 Ca1.AppAth at p. 263 ["nothing in Califomia law precludes an employer from
following the established federal policy permitting employers to deduct from exempt employees'
vacation leave, when available, on account of partial-day absences ii'om work."J.)
In Scenario A4, the employee works 2 hours and takes 6 hours off for personal reasons,
and has 1 hour of available sick leave and 6 hours of accnled vacation. The Company's
recommended action is to pay for working 2 hours m1d pay tlu'ough deduction from available
vacation (6 hours) because the employee is absent for 4 or more hours in the day.
The proposed recommendation is permissible but not for the stated reason, which is
premised upon the employee being absent for 4 or more hours in a work day. As indicated
previously, there is no legal requirement of an absence of "4 or more hours" in a workday that must
occur prior to applying leave balances for partial day absences. 5 h1 any event, the proposed
recommendation is permissible as previously discussed in this letter because federal and state law
allows payment tlu'ough deductions from available leave balances but requires that payment of the
.5 To the extent that your stated reason for applying specific deductions from vacation leave balances is based 011 your
understanding of the limitation for applying vacation only for absences of 4 or morc hours in a day (presumably,
contemplating the Conley court decision) as indicated in Scenarios A4, A5, A6, A7, B5, B6, B7, and B8, we stated
above that the holding in Conley appears to be based upon that employe;' 's policy which limits deductions from a
vacation leave balance for partial day absences of four or more hours. There is no indication that yom' policy has such
limits, and thus, such requirement does not constitute a basis for partial day absences in your situation.
Letter to Mary Cheung
November 23,2009
Page 11
guaranteed salary must be made for any balance to which there is no available leave. Stated
differently, the Company must pay the employee the full salary for that day but the Company may
deduct 6 hours from the available vacation leave balance,
In Scenario AS, the employee works 3 hours and takes 5 hours off for personal reasons,
and the employee has 5 hours of available sick leave and 0 hours of accrued vacation. The
Company's recommendation is that the employee be paid 3 hours for working and 5 hours for the
absence. (absence with pay) because there is no vacation acemed.
Notwithstanding the inapplicability of the "4 or more hours" langnage to justify the
recommended action, the employee must be paid for the 3 hours worked as well as the 5 hours of
absence because there is no available leave to be applied to the 5 hours of absence and no
deduction fi'om pay can be made for pattial day absences. (29 CFR § 541.602(a),) The employee
is required to receive payment equivalent to a full day of guaranteed salary and is so paid underthe
Company's recommended action.
In Scenario A6, the employee works 4 hours and takes 4 hours off for personal reasons,
and has 1 hour of available sick leave and 3 hours of available vacation leave. The Company's
recommendation is to pay for workil1g 4 hours, pay through deduction of available vaeation (3
hours), and pay the remaining 1 hour absenee (absence with pay) because there is insufficient
vacation leave to cover the entire 4 hours absenee.
Under this scenario, the employee is being paid his full salaty but the Company is reducing
the employee's vacation leave bank for hours aetually taken. The recommended action is
permissible as it provides payment equivalent to a full day of guaranteed salaty by making payment
for working 4 hours, paying through deduction of available vacation (3 hours), and providing
absence with pay for the 1 hour remaining balance.
In Seenario A7, the employee works 5 hours and takes 3 hours off, and has 1 hour of
available sick leave and 8 hours of accrued vacation. The Company's recommendation is that the
employee be paid for working 5 hours and for 3 hours absence with pay because the deduction of
vacation is not permitted for absences ofless than 4 hours.
Notwithstanding the inapplicability of the "4 or more hours" language to justifY the
reconU11ended action, the actual result under Company's reconU11endatiol1 is permissible. The
Company's recommendation correctly provides payment equivalent to a full day of guaranteed
salary by making payment for working 5 hours and providing absence with pay for the remaining 3
hours.
Partial Dav Absences Due to Sickness
Where the employee works some patt of the day but is absent for the balance of the full day
due to sickness, the Company may reduee the sick leave balance (and if there is insufficient sick
leave balance, then the vacation leave balance in such order in accordance with the plan or policy)
Letter to Mary Cheung
November 23,2009
Page 12
but stillmnst ensure payment of an amount equal to the guaranteed salary for the balance of the
full day even if an employee has no accrued benefits in the leave plan and the account has a
negative balance. as described in the following scenarios provided in your letter.
In Scenario BS, the employee works 1 hour and takes 7 hours off due to illness and has 2
hours of available sick leave and 5 hours of acclUed vacation. The Company's recommended
action is to pay for 7 hours through deduction fTOm available sick leave (2 hours) and vacation (5
hours used after sick leave exhausted per Company policy) leave balances and regular pay for I
hour of work based upon the employee being absent for 4 or more hours in the workday.
Accordingly, the proposed recommendation in Scenario B5 is permissible because the
Company applies available leave balances from sick leave (2 hours) and vacation (5 hours after
exhaustion of sick leave per the policy), and the employee is paid for working 1 hour. Thus, the
employee receives the equivalent of a full day of guaranteed salary.
In Scenario B6, the employee works 1 hour and takes 7 hours off due to ilhless and has 2
hours of available sick leave and 2 hours of acclUed vacation. The Company's reconU11ended
action is to pay the employee for working 1 hour, pay for 4 hours by deductions from available sick
leave (2 hours) and vacation (2 hours after exhaustion of sick leave per the policy), and pay 3 hours
for absence with pay. The stated reason is that since the employee is absent for 4 or more hours in
a workday, it will deduct all the sick leave and vacation acclUed for 4 hours off, pay 3 hours
absence with pay because there is insufficient sick leave and vacation accrued to account for 7
hours of absence in the day.
Notwithstanding the inapplicability of the "4 or more hours" langnage to justify the
recommended action, the proposed recommendation is permissible under the explanations
discussed in this letter which. allows payment by deductions from available leave balances but
requires that payment of the guaranteed salmy must be made for any balance to which there is no
available leave. In Scenario B6, the employer must pay the full salmy but may deduct 4 hours
from the available leave for sick leave (2 hours) and vacation (2 hours after exhaustion of sick
leave).
In Scenario B7, the employee works 1 hour and takes 7 hours off due to illness, and has 0
hours of available sick leave and 2 hours of vacation. The Company's reconunendation is similar
to that described iIi Scenario B6 above but only deducts 2 hours from available vacation (made
available because there is no available sick leave per policy). Notwithstanding the inapplicability
of the "4 or more hours" language to justify the recommended action, the Company's
reconU11endation correctly applies the applicable standards by providing for payment through
deduction of 2 hours from available vacation leave, 5 hours pay for absence, and 1 hour for
working which provides the equivalent of a fl111 day of guaranteed salary.
In Scenario B8, the employee works 5 hours and takes 3 hours off due to illness, and has O·
hours of available sick leave and 4 hours of accrued vacation. The Company's recollUllended
action is to pay for working 5 hours and pay for 3 hours absence (and applying no deductions fi·om
Letter to Mary Cheung
November 23,2009
Page 13
leave balances) because there is no available sick leave and deduction fi'om vacation IS not
permitted for absences less than 4 hours.
Notwithstanding the inapplicability of the "4 or more hours" language to justif'y the
recommended action, applying the standards discussed in this letter to Scenario B8, the Company
may pay through deduction of 3 hours from accrued vacation (available due to absence of available
sick leave per policy) and pay for working 5 hours which provides the equivalent of a full day of
guaranteed salary.
This opinion is based exclusively on the facts and circumstances described in your request
and is give!1 based upon your representations, express or implied, that you have provided a full and
fair description of all facts and circumstances that would be pertinent to our consideration of the
qnestions presented. The existence of any other factual or historical background not contained in
your letter might require a conclusion different from the one expressed herein. You have
represented that this opinion is not sought by a party to pending private litigation conceming the
issues addressed herein. You have also represented that this opinion is not sought in cOlmection
with an investigation or litigation between a client or firm and the Division of Labor Standards
Enforcement.
I hope the above sufficiently responds to your request for an opinion in this potentially
confusing area of employment law and thank you for your interest in ensuring compliance with
Califomia's wage and hour laws.
ly yours,
Robert . oginson
Chief Counsel
RRR:
cc: Labor Commissioner Angela Bradstreet