An exempt employee’s salary is subject to very limited deductions.

This page contains the following information:

• Impermissible Deductions From Salary
• Limited Deductions From Salary

Impermissible Deductions From Salary

The following types of deductions are not permitted from an exempt employee’s salary:

• Quality or quantity of work — Do not make deductions from an exempt employee’s salary for variations in the quantity or quality of work performed.
• Unavailability of work — Do not make deductions when work is unavailable because of the operational requirements of the business, if exempt employees are ready, willing and able to work. For example, if July 4th falls on a Tuesday and the business shuts down for that day and the balance of the week, exempt employees who worked on Monday of that week are entitled to a full week’s pay. If there is no work at all during the entire workweek, there is no obligation to pay an exempt employee’s salary. Employers should give reasonable advance notice of any shutdowns.
• Disciplinary reasons — Although federal regulations and court decisions permit deductions of less than a full week from exempt employees’ salary for limited disciplinary reasons, the Labor Commissioner issued an Opinion Letter stating that deductions for disciplinary reasons are not allowed in California.1
• Jury duty, witness duty or military duty — California follows the federal law about deductions from the salary of an exempt employee who serves on jury duty, as a witness or is on military leave. Deductions cannot be made from an exempt employee’s salary for periods of less than a full workweek. If the exempt employee doesn’t perform any work within the week, you can deduct from their salary for the week.$12

Limited Deductions from Salary

Certain limited deductions are permitted from an exempt employee’s salary, as follows:

Vacations and Personal Leave

When an exempt employee takes time off for vacation or personal reasons, the rules for deductions from salary differ depending on whether the employee is absent for a full day or a partial day.

Full day absences: If an exempt employee is absent for a full day or more on personal business, you can make a pro-rata deduction from their salary. To determine the daily rate, an employee’s annual salary should be divided by 52 for the weekly amount, then divided by the number of days the employee usually works in a week. The DLSE allows deductions of no more than one-fifth of a week’s salary for each day of absence, even if the employee normally works less than 5 days per week.3

Partial day absences: You may not make a deduction from salary for an exempt employee’s partial day absence, except for intermittent leave under the federal Family and Medical Leave Act (FMLA) and the California Family Rights Act (CFRA).4 If an exempt employee is absent for a partial day and has no vacation or PTO available, the employee must be paid for a full day if they perform any work that day. Note that while such salary deductions are not permitted, you may deduct from an exempt employee’s vacation or PTO accrual bank for a partial day absence for personal reasons, such as vacation, personal days and religious observances. For more information about deductions from leave banks, see “Partial Day Vacations for Exempt Employees” in Vacation.

Example: Jeff requests a vacation day but has no PTO available. You can dock the value of a day’s pay from Jeff’s salary for each full day of vacation.

Example: Joe plans on coming in after lunch on Monday to extend his vacation from the prior week. The company is generally open from 8 a.m. until 6 p.m. Joe arrives at work at 2 p.m. A deduction may be made from Joe’s accrued vacation or PTO bank for the time missed on Monday, provided he has the time available. A salary deduction is not permissible for the partial day absence.

Example: Mary wants to leave work at 10 a.m. on Friday to participate in a golf tournament. Her normal office hours are from 9 a.m. to 5 p.m. She previously used up most of her vacation time and has only two hours accrued in her vacation bank. She must receive her full salary for the day because she worked for one hour. Even though she does not have enough time in her vacation bank to cover her absence, her employer cannot deduct from her salary for the time missed. The employer may however apply the two hours remaining in her vacation bank towards her salary for the day.

Sick Leave

If you maintain a “bona fide sick leave plan,” a corresponding deduction can be made from an exempt employee’s salary in certain situations.

A bona fide sick leave plan is a plan, policy or practice that provides compensation for loss of salary due to sickness or disability. To be “bona fide,” a sick leave plan, policy or practice must:

• Have defined sick leave benefits that are communicated to employees;
• Operate as described in the plan;
• Be administered impartially; and
• Not be designed to evade the requirement that exempt employees be paid on a salary basis.5

The plan must also allow a reasonable number of absences on account of illness without loss of pay. There is no bright-line test for what is a reasonable number of absences. Both the federal DOL and the California DLSE state that a determination of whether a plan is bona fide would depend on the plan itself and must be made on a case-by-case basis.6

• California’s mandatory paid sick leave law doesn’t address whether mandatory paid sick leave policies are bona fide sick leave plans for purposes of deducting from an exempt employee’s salary. However, for such a plan to be bona fide, it must meet the requirements outlined above. Employers with questions about whether any sick leave policy meets the definition of bona fide should consult legal counsel.

Where an employer has a bona fide sick leave plan and an exempt employee takes time off for illness or disability, the rules for deductions from salary differ depending on whether the employee is absent for a full day or a partial day.

Full day absences: If you have a bona fide sick leave plan, you can make a deduction from an exempt employee’s salary for a full-day absence on account of illness or disability, both before the exempt employee qualifies for sick leave under the plan and after the employee exhausts the leave allowance under the plan.7 If you have a PTO plan rather than a pure sick leave plan, the law is not clear about whether you can make a salary deduction when an exempt employee is out sick but doesn’t have any PTO in their leave bank. Employers with questions about whether any leave policy meets the definition of bona fide should consult legal counsel.

Partial day absences: Partial day deductions from an exempt employee’s salary on account of illness or disability are not permitted, unless the time off is intermittent FMLA or CFRA.8 However, deductions can be made from an exempt employee’s sick pay bank for partial day absences on account of illness, provided the employee has such sick pay available at the time of the absence.9

Initial or Final Weeks of Work

You can prorate an exempt employee’s salary in full-day increments for the initial and final weeks of work, paying the employee only for the days worked in the pay period. However, an employee is not
on a salary basis within the meaning of the exemption if you employ them occasionally and pay them a proportionate part of the weekly salary when so employed. Under these circumstances, even the full weekly salary payments would not meet the requirement, because casual or occasional employment for a few days at a time is inconsistent with employment on a salary basis.

Family and Medical Leave

Leave under the FMLA and CFRA by an exempt employee will not affect the exempt employee’s status. You can make deductions from the exempt employee’s salary for hours taken as intermittent or reduced FMLA and CFRA leave.10

1. DLSE Opinion Letter 1997.04.28