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Patrick, Esq.
Patrick, Esq., Lawyer
Category: California Employment Law
Satisfied Customers: 6942
Experience:  Significant experience in all areas of employment law.
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Hi. My company is in California and my question is about deducting

Customer Question

Hi. My company is in California and my question is about deducting pay and PTO from exempt employees for days the company is closed following a holiday. For example, the day after Thanksgiving the company is closed and will deduct either pay or PTO from exempt employees for that day.
This has been the company’s practice for many years. It is not written in the employee handbook under the PTO policy, but it’s written on our holiday schedule poster that we are closed the day after Thanksgiving “without pay.”
Is the company allowed to tell the employees that they have to use their PTO for this day? And if they don’t have PTO available is the company allowed to deduct from their pay?
Thanks!
Tracy
Submitted: 1 year ago.
Category: California Employment Law
Expert:  Patrick, Esq. replied 1 year ago.
Hello and thank you for entrusting me to answer your question.

To be clear, are you talking about salaried employees here who receive a fixed paycheck every pay period? Or simply exempt hourly employees? This likely makes a big difference.

I very much look forward to assisting you regarding this matter.
Customer: replied 1 year ago.

yes, exempt salaried employees

Expert:  Patrick, Esq. replied 1 year ago.
Tracy,

Thanks for your reply. In order to answer your question, it is first necessary to explain a basic principle of salaried employment, which is that workers are entitled to their fixed salaried paycheck regardless of the quality or quantity of work they perform, with only certain limited exceptions.

The most common exception to this general rule that salaried employees must receive the same paycheck regardless of the quality or quantity of work is where the employee misses a full day of work for personal reasons, illness or vacation.

In such a circumstance, the employer can deduct a pro rata portion of the employee's salary for the missed days. (i.e., if there are 12 work days in the pay period and the employee misses three full workdays, the employee's salary payment can be reduced by 25%)

An employer may NOT reduce a salaried employee's pay for absences "occassioned by the employer," meaning any day on which the employee would have otherwise worked but the employer has scheduled the day off or closed the office.

Closing for a holiday is an absence "occassioned by the employer," and as such, a salaried employee can not have their salary reduced for missing such a work day. Again, this is a basic principle of salaried employment.

It is also important to understand that accrued PTO is considered a "wage earned," and as such may not be forfeited by an employee--they must either be "cashed out" for it or allowed to take the paid day off. While PTO cannot be forfeited, employers do enjoy the right to control when and how employees use that time and can require employees to use it on certain days.

The problem with the arrangement you have described is that you cannot force a salaried employee to use a PTO day on a day for which they are already entitled to be paid (an absence "occassioned by the employer") unless you want to pay them for the PTO on top of their regular salary. Of course, that's not what you are describing--what you are describing is paying them the PTO day in lieu of their regular salary on that day. But for the reasons described above, that is not permissible.

Since an employee is already entitled to be paid for a day on which their employer "closes shop," counting that day off as a PTO day would constitute an impermissible forfeiture of PTO (which remember is considered a "wage earned") and would therefore be illegal.

So, while you can force a salaried employee to use PTO on a day that they are absent for personal reasons (since they otherwise would not be entitled to be paid on that day), you cannot force a salaried employee to use a PTO day on a day that the company closes shop, since the employee is already entitled to their pay for that day.

Thus, what you describe would be an impermissible labor practice.

Please do not hesitate to let me know if you have any questions or concerns regarding the above and I will be more than happy to assist you further.

If you do not require any further assistance, I would be most grateful if you would remember to provide my service a positive rating, as this is the only way I will receive credit for assisting you.

Finally, please bear in mind that none of the above constitutes legal advice nor is any attorney client relationship created between us.

Very best wishes to you.
Patrick, Esq., Lawyer
Satisfied Customers: 6942
Experience: Significant experience in all areas of employment law.
Patrick, Esq. and 4 other California Employment Law Specialists are ready to help you
Customer: replied 1 year ago.

Hi again,


 


I just found some information that contradicts the above answer and I need help figuring out what is right. This is form an article dated May 2012:


 


A 2009 U.S. Department of Labor opinion letter regarding forced use of PTO for exempt employees during a plant shut down indicates the Wage and Hour Division’s position as follows:


 


“Since employers are not required under the FLSA to provide any vacation time to employees, there is no prohibition on an employer giving vacation time and later requiring that such vacation time be taken on a specific day(s). Therefore, a private employer may direct exempt staff to take vacation or debit their leave bank account […] whether for a full or partial day’s absence, provided the employees receive in payment an amount equal to their guaranteed salary.”



Employers restricting the use of PTO or forcing employees to use PTO should check state legal requirements prior to implementing such a policy. For example, a 2009 California DLSE opinion letter indicates employers must provide a minimum of a 90-day advance notice when requiring exempt employees to take mandatory vacation/PTO.

Customer: replied 1 year ago.
Relist: Incomplete answer.
Pleas answer follow up question:

A 2009 U.S. Department of Labor opinion letter regarding forced use of PTO for exempt employees during a plant shut down indicates the Wage and Hour Division's position as follows:
“Since employers are not required under the FLSA to provide any vacation time to employees, there is no prohibition on an employer giving vacation time and later requiring that such vacation time be taken on a specific day(s). Therefore, a private employer may direct exempt staff to take vacation or debit their leave bank account […] whether for a full or partial day's absence, provided the employees receive in payment an amount equal to their guaranteed salary.”
Employers restricting the use of PTO or forcing employees to use PTO should check state legal requirements prior to implementing such a policy. For example, a 2009 California DLSE opinion letter indicates employers must provide a minimum of a 90-day advance notice when requiring exempt employees to take mandatory vacation/PTO.
Expert:  Patrick, Esq. replied 1 year ago.

Tracy,

Thank you for your reply.

The information you have posted above is an interpretation of federal law without consideration to any additional employee rights that state law may impose.

Indeed, California law is unique in its treatment of PTO because it regards XXXXX XXXXX such days as a "wage earned." Note that federal law has no such requirement (and neither do most states), and so under federal law, employees can be forced to use vacation or PTO at any time.

Since PTO is considered a wage earned in the state of California and cannot be forfeited, that changes the analysis substantially, as an employee cannot be docked a PTO day for a day on which they are already entitled to be paid.

This is why the analysis you have uncovered is incomplete for the purposes of a California employer. It fails to take into account the unique way in which California law treats PTO.

I hope this helps clarify.

Customer: replied 1 year ago.

ok, thanksSmile

Expert:  Patrick, Esq. replied 1 year ago.
No problem. I will look into this a bit further for you, but I am unaware of any caselaw that would change what I have described above.

Glad I could help.
Customer: replied 1 year ago.

Hi,


 


You have been very helpful. However I have a couple more follow up questions.


 


What if a company decides to be closed for an entire week, or even two weeks during the holidays? Are they allowed to not pay the salaried exempt employees in this situation and the employees must either use their PTO or not be Paid?


 


Also, if the company puts in their PTO policy that employees must save their PTO for the day after thanksgiving (or Christmas eve, or New years Eve, and so on) or not be paid, is this permissible? At a seminar I attended on paying exempt employees, the presenter said "I guess it could be possible to not have to pay the employees on the day after Thanksgiving if it was in the PTO policy that they must save their PTO for this day."


 


What is your interpretation on this?


 


Thanks!


 


Tracy

Expert:  Patrick, Esq. replied 1 year ago.

Tracy,

Thanks again for the reply. 29 CFR 541.602 states in part that "Exempt employees need not be paid for any workweek in which they perform no work."

Thus, where an employer closes shop for just one day (e.g. for Thanksgiving) they cannot deduct from a salaried employee's pay. However, where the employer closes shop for a full week, that would constitute a "workweek in which [an employee] perform[s] no work," and thus a pro rata salary deduction would be permissible. Since an employee missing a full week would not be entitled to their regular pay for that week, the employer may deduct from PTO for the week, since doing so would not constitute a forfeiture of PTO but rather a substitute for days the employee would otherwise not be entitled to wages.

I don't see how modifying your PTO policy to state that employees must "save their PTO" for Thanksgiving would change the legal obligation you have as an employer to pay salaried wages. To draw a comparison, an employer cannot write in their personnel policy that "minimum wage shall not apply" and expect their employees to now be exempt from minimum wage. The point is, simply modifying a company policy cannot serve as an excuse to violate California labor law.

Furthermore, I should note that if the Labor Board were to find that you were making impermissible deductions from a salaried employee's wages (which is what you would essentially be doing by docking PTO on days for which the employee was already entitled to be paid) you may be putting their exempt salaried status at risk. The Labor Board could then say that since you are not treating the employee like a true salaried exempt employee, they are now an hourly employee. That could potentially result in exposure to a claim for unpaid overtime and/or wages, which would be very bad.

I hope this all helps.

Customer: replied 1 year ago.

again, thank you very much for your help

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Expert:  Patrick, Esq. replied 1 year ago.
Truly my pleasure!

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