To be exempt from overtime, an employee must, among other requirements, be paid a predetermined minimum salary, currently at least $2,340 a month, regardless of the quality or quantity of hours worked. However, both federal and California law permit you to dock an exempt employee’s salary under certain circumstances without losing the worker’s exempt status. You can dock, for example, if the employee performs no work in a week or takes off a day or more for personal reasons.
Unfortunately, it’s not always clear whether California follows all federal rules for salary docking. But the state Division of Labor Standards Enforcement recently updated its operations and procedures manual, providing insight into the state government’s position on some special docking rules. Note that the DLSE rules apply only to private employers in California; public employers are subject to federal docking rules.
Here’s a rundown of some key points to keep in mind when you write your exempt workers’ checks.
The HR Management & Compliance Report: How To Comply with California Wage & Hour Law, explains everything you need to know to stay in compliance with the state’s complex and ever-changing rules, laws, and regulations in this area. Coverage on bonuses, meal and rest breaks, overtime, alternative workweeks, final paychecks, and more.
No Docking for Safety Violations
Generally, you can’t dock an exempt worker’s weekly salary for disciplinary reasons, although federal law allows disciplinary docking when the employee violates a “safety rule of major significance.” The DLSE says that private employers in California cannot dock for this reason. That’s because state law forbids disciplinary fines or penalties, and if work is performed, it must be paid for at the normal rate. In light of this clarification, you can only dock for disciplinary reasons if you suspend the employee for at least a full workweek.
Partial-Day Absences Don’t Equal Partial-Day Pay
Under the salary rules, you can’t deduct from an exempt employee’s salary for partial days off. However, some courts have ruled that employers could deduct for partial-day absences from accrued paid leave—such as vacation or paid time off (PTO). But the DLSE takes the position that because California treats accrued paid leave just like wages, partial-day docking from accrued paid leave isn’t permitted.
You can, however, deduct a partial day from sick leave if the sick leave doesn’t vest and the employee isn’t entitled to be paid out for it on leaving the company.
Forced Vacation During Temporary Shutdowns
Finally, during these hard economic times, many businesses consider temporary shutdowns to shave costs. If you close for a full workweek, you don’t have to pay exempt employees for that period. But whether you can require exempt workers to use up their accrued vacation or PTO during that period hinges on your written policies or the terms of an employment agreement.
The DLSE recently clarified that you can only require use of vacation or PTO if: 1) you have a policy, issued at least nine months before the scheduled closure, stating that exempt workers must use vacation or PTO during that period; or 2) an exempt worker’s employment agreement states they must use such accrued time off during a specified period of the year (such as during the weeks of Christmas and New Year’s Day).