Courts Reject Labor Commissioner Policies

Courts Reject Labor Commissioner Policies¹

Employers May Deduct Vacation Leave for Partial-Day Absences of Exempt Employees

In Conley v. Pacific Gas & Electric Company,2 a California Court of Appeal ruled that employers may make vacation deductions for partial-day absences of employees without jeopardizing their exempt status. While federal law has allowed such deductions under the FLSA, California’s Division of Labor Standards Enforcement ("DLSE") had a different interpretation of California law. In order to be exempt under California law, employees generally must be paid on a "salary basis." This means that an exempt employee’s pay cannot be subject to reduction because of variations in the number of hours the employee works. Until recently, the DLSE took the position that a vacation deduction for a partial-day absence was inconsistent with an employee’s exempt status even though the employee received the same amount of pay as if he or