CALIFORNIA: Partial-day leave bank deductions under four hours are OK

Employers may deduct from exempt employees’ leave banks for partial-day absences, even when the absence is less than four hours, according to an opinion letter from the California Division of Labor Standards Enforcement (DLSE). The letter is a reversal of the DLSE’s previous position, and will allow employers greater latitude in deducting from paid leave banks.

As a general rule, one of the requirements for ensuring that an employee is exempt from overtime is to pay a uniform salary, regardless of variations in quantity or quality of work. If an exempt employee works part of a day, then normally you must pay the full salary. With the right policies in place, however, you’re allowed to use banked sick leave or vacation hours to pay for the missed time. The DLSE previously limited such use of leave banks to partial-day absences of four hours or more, but the new opinion letter brings California in line with federal law (DLSE Opinion Letter 2009.11.23). For more information, see our Legal Guide, “Salary Basis Test for Overtime Exemptions” (1219).