Handling Vacation Deductions for Exempt Employee’s Part-Day Absence

JHawthorne_eleakis203057-010Is a deduction from an exempt employee’s vacation bank for a partial day’s absence limited to increments of four or more hours?


In 2005, there was a California court of appeal case involving the Pacific Gas and Electric Company. PG&E established a policy that if an exempt employee took off four or more hours of personal time in the course of a workday, PG&E would deduct that amount from the employee’s vacation bank. See Conley v. PG& E, 131 Cal App 4th 260 (2005).

Timing of Vacation Use

In Conley, the court concluded that PG&E’s policy neither imposed a forfeiture nor operated to prevent vacation from vesting as it is earned. The policy merely regulated the timing of exempt employees’ use of their vacation time.

The Chief Counsel for the Labor Commissioner then concluded in a 2009 opinion letter (OL 2009.10.15) that the Conley case did not restrict an employer from making deductions from an employee’s vacation time in amounts less than four hours pursuant to a bona fide employer plan.

Vacation/Leave Deductions

In 2014, a California appeals court adopted the analysis in Conley and the 2009 Opinion Letter and confirmed that an employer can deduct from an employee’s vacation or leave time for partial-day absences in any time increment specified by the employer’s policy. See Rhea v. General Atomics, 174 Cal.Rptr.3d 862 (2014).

Under the salary basis test for exempt employees, the obligation is that the employee receives no less than the proportionate amount of the employee’s salary in the case of a partial day’s absence for personal reasons, even if a portion of such pay comes from the employee’s vacation bank.

You are never permitted to deduct from the salary of an exempt employee for a partial day of absence. The full day’s salary would be due if the employee’s vacation bank was insufficient to cover the missed daily time.

The Labor Law Helpline is a service to California Chamber of Commerce preferred and executive members. For expert explanations of labor laws and Cal/OSHA regulations, not legal counsel for specific situations, call (800) 348-2262 or submit your question at www.hrcalifornia.com.

Staff Contact: Jessica Hawthorne