DLSE Opinion Letter re Reducing Salary and Workdays

The California Division of Labor Standards Enforcement agreed that temporarily reducing an exempt salaried employee's workweek to 4 days did not violate the salary basis test. The employer was free to proportionally reduce the employee's salary. This is consistent with a long line of federal authorities.

In a prior letter, 2002.03.12, the DLSE said that exempt employees would not be subject to salary reductions for a furlough. It appears DLSE has reversed that position. The new DLSE opinion is here.

Unfortunately, DLSE did not address another, separate, furlough question re exempt employees: can the employer "force" payout of vacation / PTO for furloughs / shutdowns of less than a full workweek? It's not a controversial proposition that the exempt employee is not entitled to any salary if the furlough is a full workweek. Therefore, there should not be any problem in paying out PTO/vacation for full workweek absences.

But what about partial week, ad hoc furloughs? Normally, the exempt employee is entitled to a full salary for any workweek in which s/he performs any work. There are exceptions, but involuntary absences of a day or more for lack of work are not one of them.

The new letter does not fully address this issue. I understand a prospective announcement reducing exempt employees' responsibilities to work with a concomitant reduction in salary. But if the employer says "we're going to shut down three days before Christmas," is that covered by this letter? If so, then it would be OK to pay required PTO for the three day furlough because the salary was reduced prospectively. If the opinion letter does not apply to this scenario, then it probably remains improper to force payout of PTO because the employee was already entitled to full salary. If you're confused, join the club.

This is a California-only issue, because the FLSA does not consider vacation / PTO to be vested. Also, there is an FLSA provision for public sector furloughs for economic reasons, so the question does not apply to the public sector.

Any wage-hour gurus who want to debate, send me an email / comment / wine.