HR departments have been asking when a salaried employee takes time off for sickness and no longer has available sick leave our PTO, can there be a deduction from salary for those days off? This appears to be the case in California.
Here are the rules:
–Deductions allowed when absent from work for one or more full days for personal reasons other than sickness or disability (29 CFR § 541.602(b)(1); DLSE Manual § 51.6,14,3.)
— Deductions allowed 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 sickness or disability (29 CFR § 541.602(b)(2); DLSE Manual § 51.6.15.2.). This applies to California employees because of the required sick leave policy.
–This means an exempt employee’s salary cannot be subject to reduction for partial day absences. All that is allowed is to deduct these absences from PTO. 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 salary basis test]; Conley v. P.G.& E. (2005) 131 Cal.App. 4th 260, 267; DOL Opinion Letter FLSA2007-6 (February 8, 2007) [partial day absences not expressly recognized by Part 541 regulations may render an employee’s compensation not on a salary basis, thereby jeopardizing exempt status].) Hence, if the employee is absent for 1 ½ days, there can only be a deduction for one full day.
Below are the various alternatives as to what salary deductions can be made from an exempt employee for absences. This assumes that the employer is complying with California law and has a sick leave and PTO policy (collectively referred to as “PTO”):
PERSONAL REASONS–FULL DAY ABSENCES:
— Has accrued PTO: No salary deduction, but Company can deduct full day from PTO
— No accrued PTO: Full day salary deduction can be made.
PERSONAL REASONS–PARTIAL DAY ABSENCES:
— Has accrued PTO: No salary deduction, but Company can deduct partial day hours from PTO
Conley v. Pacific Gas & Electric Co., 131 Cal.App.4th 260 (2005); Rhea v. General Atomics, 227 Cal.App.4th 1560 (2014).
— No accrued PTO: No salary deduction can be made.
SICKNESS OR ILLNESS–FULL DAY ABSENCES:
— Has accrued PTO: No salary deduction, but Company can deduct full day from PTO
— No accrued PTO: Full day salary deduction can be made.
SICKNESS OR ILLNESS–PARTIAL DAY ABSENCES:
— Has accrued PTO: No salary deduction, but Company can deduct partial day hours from PTO
— No accrued PTO: No salary deduction can be made.
Notes:
If the exempt employee performs any work duties, including answering phones, listening to voicemail, emails, reviewing records, etc., then it is considered a partial work day. Technically, the employee could spend a few minutes doing this.
If the exempt employee takes a full day off (sickness or personal reasons), but refuses to use accrued PTO (wanting to save it for another day), that’s fine, but they will not be paid for that day. They can also use part of their unpaid FMLA if the time off is for sickness.
There is no need to pay a full week salary for the first and last weeks of employment if the employee only works for a partial day.
If the employee has committed a safety infraction and sent home, the company is not required to pay for a full day’s wages.
The week’s salary is not owed if no work is performed at all during the workweek.
An exempt employee cannot be docked for late arrivals or leaving early. However, as discussed on the phone, an exempt employee cannot take advantage of these rules. For example, he or she cannot on a daily basis come to work an hour or two late. Continuing to do so would be grounds for termination.
No deductions can be made for jury duty, witness appearances or military leave, unless the entire week is taken off.
Assuming the exempt employee is receiving workers compensation, the company is allowed to make full day deductions due to such absences.
Some companies claim there can be partial day deductions from the PTO bank only if the employee’s absence is 4 or more hours. For example, the employee works 5 hours and then goes home sick. If it is less than 4 hours, it is considered so minor there should be no deductions. For example, an employee showing up to work and then has to leave an hour later sick. But the California case of Rhea v. General Atomics, 227 Cal.App.4th 1560 (2014) abandons this arbitrary 4-hour benchmark. Now, technically, any partial day absences can be deducted from PTO.
Conclusion:
HR professionals have to be very careful in this area. The State of California has given employees 3 days per year for paid sick leave. Employers have also added to this with additional PTO. This is all employees are entitled to receive. If they go beyond this, it’s on their own time and will not be paid. The State of California has never required companies to pay for long-term illnesses. Instead, healthcare costs are covered by the major medical plan and if the time-off becomes substantial, that employee can apply for state disability.
However, a company has the discretion to continue paying employees for time off due to sickness if she wishes. But it would have to be neutrally applied to all employees.
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