EXEMPT PARTIAL DAY ABSENCES: TO DOCK OR NOT TO DOCK - THAT IS THE QUESTION
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Most employers know that in order to be exempt from overtime premium requirements, employees must meet two tests - they must perform exempt duties more than 50% of their working time, and they must be paid on a "salary basis." The "salary basis" test has been as confusing to employers as is the duties tests. Generally, an employee must receive his or her full salary for any week in which he or she performs any work without regard to the number of days or hours worked. An employee need not be paid, however, for any work week in which he performs no work.
There are certain permissible exceptions to the requirement that an employee receive his or her full salary for any week in which he or she performs work. Deductions may be made: when the employee absents him or herself from work for a full day or more for personal reasons; pursuant to a sick leave policy, if the employee is absent for a full day or more, and for penalties imposed in good faith for infractions of safety rules of major significance.
But what if an exempt employee comes to work, stays only an hour and leaves for personal business the rest of the day - can you dock time from his/her vacation leave accrual bank? Since 2001, the federal rule has allowed exempt employees to use partial vacation and sick leave days so long as there was no loss of pay on payday. That is, if an exempt employee takes a half day off, the half day of accrued leave can be docked from the accrual bank - never from the paycheck. The total gross compensation paid for that pay period (the "salary") will not have been reduced. If the employee does not have sufficient leave accrual, he/she can not actually receive a lower paycheck because of the partial day missed. That federal policy did not help employers in California, however, because the Labor Commissioner had a different policy. The Labor Commissioner enforcement policy only allowed employers to dock leave accruals for partial day leave absences due to illness, but not for absences due to personal reasons, i.e., vacation.
In good news for California employers, in late July, the Court of Appeal (located in the San Francisco Bay Area), has ruled that docking salaried employees' vacation banks for a partial-day absence does not compromise the exemption status. In Conley v. Pacific Gas and Electric Company, the court held that "nothing in California 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 from work." The decision contradicts a three-year old DLSE Opinion Letter cited by the appellants, and recently depublished by Labor Commissioner Donna Dell, that asserted that salaried employees could not be docked pay or benefits for any partial-day absences.
The court observed that docking leave accruals for partial day absences does not result in employees forfeiting vacation accrued, it merely "regulate[s] the timing of exempt employees' use of vacation time by requiring them to use it when they want or need to be absent from work for partial-days." The appellate court clarified partial-day to mean an "absence of four or more hours in a single day."
Based on this new appellate court opinion, employers may dock leave accruals for exempt employees' partial day absences due to illness or personal/vacation time. Employers should not, however, dock accrual balances for absences of less than four hours - the appellate court would not consider an absence of less than four hours to be a "partial day." Finally, if there is not sufficient leave accrued for a partial day absence, the employee's actual paycheck must not be reduced for that partial day absence.
Even with this new court guidance, these questions may still be complicated. When in doubt, consult employment law counsel. The attorneys of Simpson, Garrity & Innes, PC, are available to help you with these issues.