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July 28, 2005
In a suit involving a class action overtime exemption issue, a California court determined that “…nothing in California law precludes an employer from following the established federal policy permitting employers to deduct from exempt employees' vacation leave, when available, on account of partial-day absences from work, see Conley v. PG & E, California Court of Appeal, First District (7/21/05).
PG & E has a vacation leave policy where deductions are made from exempt employees' vacation leave banks for partial-day absences. The suit contends that PG & E's vacation leave policy is a reduction in the amount of compensation exempt employees receive based on the quantity of work they perform, and is a violation of the salary basis test. Therefore, it is further argued, none of the affected employees are exempt.
The court said: “Although the federal salary basis test may require PG & E to give exempt employees additional time off for partial-day absences after they exhaust their vacation leave banks, under PG & E's vacation leave policy, PG & E's exempt employees do in fact receive all of the paid time off they have earned--they must simply use that accrued vacation time to make up for partial-day absences. In other words, because the deductions made from vacation leave banks of exempt employees represent days on which those employees have, in fact, taken at least four hours off work, PG & E's vacation leave policy neither imposes a forfeiture nor operates to prevent vacation pay from vesting as it is earned. All it does do is regulate the timing of exempt employees' use of their vacation time, by requiring them to use it when they want or need to be absent from work for four or more hours in a single day.”
Conley pointed out to the court that their argument has been adopted by the Department of Labor Standards Enforcement (DLSE) in several interpretive advice letters. The court noted that: “Advice letters of this type are properly considered by the courts, and may be entitled to some weight, but they do not have the force of law and are not controlling on us. …Thus, to the extent that the DLSE advice letters support appellants' [arguments] … we respectfully disagree with their [DLSE’s] analysis…”
