California Salaried Employee Law
by Matthew A. Kaufman
The Kaufman Law Firm
Los Angeles Office:
Toll Free: 888-990-4659
True salaried employees regularly receive a predetermined amount of compensation each pay period (on a weekly or less frequent basis).
According to a Department of Labor interpretation, "An employee is not paid on a salary basis if the employer makes deductions from the predetermined salary, for example, for absences caused by the employer or because of the operating requirements of the business. If the employee is ready, willing and able to work, deductions may not be made for time when work is not available."
The compensation cannot be reduced because of variations in the quality or quantity of the work performed.
Lack of work: or
Variations in the "quality or quantity of the work performed", or
Disciplinary reasons except penalties imposed "for infractions of safety rules of major significance."'
Deductions from pay for time missed may destroy an employee's exempt status. Employers may deduct from an employee's salary for an unexcused absence for a full day on which work is not performed, where the absence is due to personal reasons other than sickness or accident. But the employer may not deduct for absences due to sickness or injury for less than a week or for less than a week's absence for jury duty, witness appearances or military duty, except the can claim a deductions for fees (such as jury duty fees) received by the employee.
Employers should be careful when suspending employees without pay, because an improper suspension may jeopardize the salary basis test. Suspension for violations of major workplace safety rules does not affect an employee's salaried status.
Salaried employees suspended for less than full week are entitled to a full week's pay. On the other hand, salaried employees can be suspended for a full week without pay and retain their exempt status.
The new regulations adopt by the U.S. Department of Labor permit disciplinary deductions in pay for a full day or more, imposed in good faith for infractions of workplace conduct rules. The effect of this on California employees, governed by California, has yet to be determined by the courts. However, since Legislature and Industrial Welfare commission created the California rules prior t the new Federal Regulations on August 23, 2004, it appears that the old regulations should be used.
1. An absence from work for one or more full days for personal reasons, other than sickness or disability,
2. An absence from work for one or more full days due to sickness or disability if deductions made under a bona fide plan, policy or practice of providing wage replacement benefits for these types of absences,
3. To offset any amounts received as payment for jury fees, witness fees, or military pay,
4. Penalties imposed in good faith for violating safety rules of "major significance", such as "no smoking" rules, rules in explosive plants, oil refineries, and coal mines,
5. Unpaid disciplinary suspension of one or more full days imposed in good faith for violations of workplace conduct rules, such as rules prohibiting sexual harassment or workplace violence,
6. Proportionate part of a n employee's full salary may be paid for time actually worked in the first and last weeks of employment,
7. Unpaid leave under the Family Medical Leave Act.
If an employee performs no work during the pay period, then the employer can be excused from paying a salary. However, if any work is done, then the employee should receive a full weeks salary. Under the federal law, the only exception to this appears to be that the first and last weeks salary can be prorated.
The exemptions require that an employee must be paid at least double the California minimum wage for full time employment
This is related to but not part of the salary basis test. To be exempt under California law, an employee must also earn a monthly salary equivalent to no less than two times the California minimum wage for full-time employment. California minimum pay as of this writing (September 23, 2005) is $6.75 per hour. Full-time employment is 40 hours a week, so the requirement is approximately $28,000 a year.
The federal law requires that employees be paid at least $455 a week.
There are many exceptions to the salaried basis test
The law provides the employers with several defenses:
1. The "window of correction" rule - This rule provides that, despite an improper deduction, the exemption is not lost if an employer 1) has such a clearly communicated policy which prohibits improper deductions and includes a complaint mechanism, 2) reimburses employees for any improper deductions, and 3) makes a good faith commitment to comply in the future. In such a case, the employer will not lose the exemption for any employees unless the employer willfully violates the policy by continuing to make improper deductions after receiving employee complaints. This exists under both California and federal labor law.
2. Fee Basis payments - This is a new federal concept, and it should not apply in California. Administrative and professional employees may also be paid on a fee basis rather than on a salary basis. An employee is paid on a "fee basis" if the employee is paid an agreed sum for completing a single and unique job, regardless of the time required to complete the work. Payment on a "fee basis" is not available for a series of non-unique jobs repeated an indefinite number of times for which payment on an identical basis is made over and over again. Payments based on the number of hours or days worked and not on the accomplishment of a single, unique task are not payments on a fee basis. Payment has to be at least $455 a week.
The law does not require that a salary be paid to some employees:
Computer software employees. Under California law, they need to be paid an hourly amount of $41 per hour as of January 1, 2001. Every year, this amount adjusts upwards. To determine the current rate Click Here. Under federal law, they must be paid $27.63 per hour.
Outside sales employees (California and federal).
Doctors, Lawyers and Teachers (federal only).