Under both federal and California law,
exempt employees generally must be paid their full pre-determined weekly
salary for every week that they perform any work. As a result,
employers may make only limited deductions from the pay of exempt
employees. Our lists of permitted and prohibited deductions will help
you determine when you can deduct pay without jeopardizing the
employee’s exempt status.
Permissible Deductions
You can deduct from an exempt employee’s salary based on the following:
- Absences for personal business. If an exempt
employee takes a full day or more time off for personal business, you
can deduct that time on a pro rata basis from the salary owed. If,
however, the employee performs any work during a personal day, you can’t
make a deduction for a partial day absence. - Absences for sickness or disability. You may make
deductions for a full day or more time off due to sickness or disability
(including work-related accidents) if you also have a “bona fide” plan,
policy, or practice that provides full compensation for loss of salary
caused by sickness and disability (sick leave)—and the employee has
exhausted his or her leave under that plan. - Disciplinary reasons. California law permits
employers to deduct for time off because of a disciplinary suspension
only if the suspension lasts a full week (the usual number of days the
employee is scheduled to work in a workweek) or more. - First and last week of employment. You are allowed
to pay only a proportionate part of an employee’s salary for the time
actually worked during the first or last week of employment.
Prohibited Deductions
You can’t make deductions based on the following:
- Quantity or quality of work performed. Exempt employees’ salaries can’t be reduced because of variations in the quality or quantity of the work performed.
- Lack of work. When an exempt employee is ready,
willing, and able to work, you can’t make deductions for the time when
work is not available if the employee has performed any work in that
week. For example, if you close your business for three days, you must
still pay exempt employees for a full week. If, however, you close for a
full week, exempt employees would be due no pay because they didn’t
work at all that week. - Safety penalties. You may not deduct pay because of safety infractions.
- Jury duty/witness appearance/military leave. Deductions
aren’t allowed for absences caused by jury duty, attendance as a
witness, or temporary military leave for periods of less than a full
workweek.
For more on exempt vs. non-exempt California rules, download our free White Paper, Paying Overtime: 10 Key Exemption Concepts.