I’m hoping you can help clarify something for me. What happens when an exempt employee has used up all of his sick and vacation time, and then he needs a day off? Do I still have to pay him for that day, even though he is out of paid leave time? This seems unfair, but I know that there are a lot of rules regarding deductions from exempt employees’ wages and I don’t want to make a mistake.


Generally speaking, the law requires that exempt employees be paid their full salaries for any workweek in which they perform any work, regardless of the number of days or hours that are actually worked. This is because exempt employees are compensated based on the value of the work they perform (i.e., the fulfilling of their job duties), as opposed to the number of hours that they spend working. You are right to be cautious about the issue of making deductions from the wages of exempt employees, since inappropriate deductions can lead to that employee losing his/her exempt status. Once an employee is reclassified as non-exempt, he/she becomes eligible for overtime compensation and meal and rest periods under the California Wage Orders, and may be able to make a claim for past unpaid overtime or for breaks that were not provided.

In light of the rule requiring payment of full salary for any week in which work is performed, employers typically cannot make deductions from an exempt employee’s salary for absences caused by illness unless the absence exceeds a full week. However, if the employer has a bona fide paid sick time policy and the employee has exhausted his/her allowance under the policy (or is not yet eligible for paid sick time under the terms of the policy), then the employer may make salary deductions for subsequently missed full days of work only. Note that those deductions must be made in accordance with the bona fide policy of providing compensation for salary lost due to illness.

The rule with regard to vacation time is similar. The 2005 California Appellate Court case of Conley v. Pacific Gas & Electric ( 131 Cal. App. 4th 260) established the rule that salaried employees in California who have accrued, unused vacation time in their “bank” can have that vacation time docked if they work less than four hours on any particular workday, and that such docking of vacation time does not render them non-exempt. However, the court stated that compliance with federal law requires that an employer allow exempt employees who have exhausted their vacation leave to take partial-day absences without a corresponding loss in pay. Wage deductions are therefore only permitted if the employee takes a full day off, and if he/she performs no work that day. You should note that “performing work” includes even minor activities, such as checking email and making telephone calls, even if the employee only spends a few minutes engaged in those activities.

In the case of your employee, who has used up all of his sick and vacation time, you will only be able to make deductions from his pay for full days of work that are missed from this point forward. In order for this rule to apply, however, the exempt employee must not perform any work-related duties during his day off, even if they are only performed for a very short period. If the employee performs any work at all during the course of that day, or if he instead only takes a partial day absence, it will not count as a full day off and the employee will be entitled to receive his full salary for that day.
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