Weird Payroll Issues that Can Arise

Payroll Issues Such as Salary Exempt Employees, Time Off and Partial Days Worked

How do you handle your payroll when an employee who is salary exempt, takes a partial day or a full day off? It’s a payroll issue that comes up often when talking with clients and we want to make sure you are handling it correctly.

In 2009 California issued an opinion letter on these kinds of payroll issues. The letter states that although an employer may not deduct partial-day absences from an exempt employee’s salary, the employer may deduct from an accrued balance of time earned of less than a full day under a bona fide plan (PTO, vacation, sick, etc.) that provides for such types of leave without an employee losing his or her exempt status. If an exempt employee’s vacation, PTO or sick leave balances do not cover a partial-day absence, the employee must still be paid his or her full-day salary. Payroll Issues

The State cites that there is no legal requirement that an employee must be paid or work 4 hours in order to get a full day’s salary. They call this the “4 or more hours language” in the opinion.

In 2014 the California Courts in Rhea v. General Atomics confirmed for employers that deductions from paid time off plans are permitted in any increment as described in the 2009 opinion letter. The 2009 letter has since been referenced in newer opinions, specifically from October 11, 2016, on the topic of deducting sick time in increments for salary exempt. So, while it is close to ten years old, the opinion still stands.

  • 2009 Opinion Letter is here
  • 2014 Court Case Info is here
  • Additional Opinion Letters on similar topics are here

Now for an example:  

In the State’s 2009 opinion they use the scenario of an employee working 2 hours and takes 6 hours off for personal reasons. This same employee has 1 hour sick time and 6 hours vacation available. The State confirms that the company’s recommended action of paying 2 hours for working plus deducting 6 hours vacation from the available balance is permissible. The employee is still paid for the entire day, but the accrued balances are reduced for the time away from work. If no time is available you can allow the time to go negative or use what is available, if any.

If this same employee never came into work (took the entire day off) and had no accrued time available than the employer could have the equivalent of one day’s pay removed from the person’s salary when it came time to process payroll. 

In summary, if you have an employee who is classified as salary exempt no matter how many hours they happen to work in a single day they must be paid for the entire day’s work.

If you have any questions on the above, please let us know.

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