Can Employers Reduce Exempt Employees’ Salaries for Vacation & Sick Leave Taken?

On Behalf of | Jun 10, 2018 | Benefits |


It is easy to get confused regarding what deductions are permissible from exempt (salaried) employees’ pay. While there are numerous applicable rules, today we discuss this issue as it pertains to vacation and sick leave.

When considering this issue, it’s important to analyze separately: (1) deductions from an employee’s vacation or sick leave bank, and (2) deductions from an employee’s pay.

1. Deductions from a Leave Bank

Full Days – When an exempt employee takes one or more full days of vacation or sick leave, their vacation/sick leave bank should be reduced by that amount.

Partial Days – Likewise, if an exempt employee takes a partial sick or vacation day, those hours should also be deducted from the leave bank balance.

When exempt employees have vacation/sick leave available in their bank, as in the situations above, the usage is noted, and there is no effect on the employee’s salary.

Note: Deductions from a sick leave bank are only applicable if the employer has an established, “bona fide” plan in place. There are a number of criteria for a bona fide plan, including that the plan must be defined, be communicated to the exempt employees, and be administered impartially.

2. Deductions from Pay

Full Days – When an exempt employee has exhausted all of the vacation/sick leave in his/her bank and does no work on a given full day due to vacation or sickness, a deduction can be made from the exempt employee’s salary for that day.

Partial Days – However, if an exempt employee has exhausted all of the vacation/sick leave in his/her bank and works a partial day and takes the rest of the day off for vacation or sickness, the employee’s salary cannot be reduced for that day.

Employers should always have detailed policies for vacation and sick leave in place which are communicated to employees, and in particular, all aspects of the recent paid sick leave laws established in the state of California (and in some cases further modified by a particular city) should be followed.

The issue of making deductions from exempt employees’ wages is a serious one; improper deductions can have many ramifications. Laws pertaining to these issues can be complex and confusing. Employers should seek counsel regarding their obligations under the law. Contact Freeland Law APC for a consultation with Michael Freeland, experienced employment lawyer serving San Diego, La Mesa and El Cajon, California. Michael Freeland has been practicing law for more than 27 years and specializes in employment law matters.

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