In California, If an employer uses a PTO system, and therby lumps vacation & sick time, can the employer reduce an exempt employees PTO Bank to cover an absent due to illness in full days?

The employee is absent for a full day then the employee's PTO bank can be docked.

Are you asking if the employee can be charged for a full day when the employee was not absent for the full day?

Hi Scott, Thank you for the quick reply. Landegger, Baron & Lavenant - A Law Corporation, is staing in their most recent newsletter that "If an employer uses a PTO system, and their by lumps vacation and sick time, the employer may NOT reduce the PTO bank whatsoever if an exempt employee is absent due to illness." They also reference under the CONS "Loses "use it or lose it" status; exempt employees can not lose their partial or full day's pay or pto for illness."

I am baffled by this opinion and am trying to get other's opinions of California law as it relates to exempt staff and use of PTO.

That would be news to every employer in California, were it true.:eek: Did the book cite any cases or DLSE opinion letters?

Patty, They did not provide any reference to their opinion on the matter. I have emailed them asking for reg, opinion letter or court case and have not heard back. I will share with this forum if they do. I have posted the link to the newsletter below for your reading pleasure.

http://www.landeggeresq.com/pdf/2008-06%20Leaves%20of%20Absence.pdf

I'm having a number of problems with what is stated.

I-H
I-K (never seen this law)
II-D and therefore, E-2-(a) (the issue we're discussing here) Will be interesting to see if they try to cite the Conley v Pacific Gas decision.

Agreed with Patty. I think this is an interesting document, especially the last two thirds or so, but the discussion on vacation/sick/PTO is mostly not citing any sources, just making statements and some of the statements are arguably pretty strange. The document does not mention the Conley decision at all even though many of the items in the back part of the document occurred after the Conley decision. I would consider the CA-DLSE to be pretty much the last word on this subject, and the lawyers seem to have many points of disagreement with CA-DLSE. Nothing wrong with that, but the burden of proof is on those who want to ignore CA-DLSE. Seeing how absent those sources, employees will have a 100% chance of winning a wage claim just by following the CA-DLSE line.

I suspect that the first part of the document is old (pre-Conley) and that the newer stuff was just added on without reviewing vacation/sick/PTO. That still leaves some problems (like no deduction PTO balances for full day sick taken), but the document makes more sense if viewed as an old document that has not been kept current (at least as far as vacation/sick/PTO) is considered.

Now if the preparers of this document have actual sources they are willing to share, I am sure that Patty and I would be thrilled to read them. It is curious however that vacation/sick/PTO is the only part of this long and generally useful document that fails to cite sources for the opinions expressed. Or is that just me being cynical again?

. Or is that just me being cynical again?


Yes. ;) But in this case, well deserved.

Sad to think that DAW and I thrill so easily.

I received a reply from the attorney office that posted the newsletter. Here is a cut and paste.

Teresa - I have attached an excerpt from the Labor Commissioner's Operations Manual for your review concerning deductions from leave banks and an EXEMPT employee's salary. In reviewing the section you cited, I want to clarify the intent of that section. (attachment too large to include. It is from 2002)

In California, an employer is not permitted to deduct pay from an exempt
employee if they take a day off for sickness but perform some amount of work
in that particular workweek. The interpretation of the laws concerning
deductions from exempt employees compensation however will allow from the
deduction of a "time off bank" maintained by an employer to track the amount
of sick days offered. In other words, if an employer maintains a separate
sick and vacation bank (not a combined PTO system) then the employer could
dock the "sick leave bank" but not the salary if an absence of an employee
is occasioned by illness. The only benefit for this is for evaluation
purposes or attendance (however disability-related absences can not be taken
into consideration). If the employee exceeds the allotted amount of
possible "sick leave" in any given period - the salary of the employee
cannot be deducted.

A vacation leave is treated differently than a sick leave bank. Concerning
a vacation leave, if an employee takes personal time off - not related to
illness, an employer can dock the vacation bank and then the pay of an
employee who is absent from work for PERSONAL reasons. This is the holding
of the Conley v. PGE case mentioned in the last pages of the attachment.
(Please note that the employer may dock in 4-hour increments, rather than
whole days as mentioned in the material)

A PTO policy is treated as a hybrid system by the California Labor
Commissioner. As a general rule our Firm does not support the use of PTO
policies, but we recognize that it is easy to administer. The negative
aspects of a PTO are not always consider however before implementation. As
with most laws in California, if it benefits to hold that PTO is similar to
a VACATION policy, then the Labor Commissioner will apply those principles.
When it benefits the employee to treat a PTO as a SICK leave policy, it will
then applies those rules. Most PTO policies are set in place to ease
administration of time off. The language of the PTO policy is such that a
certain number of days are available to the employee to take time off for
whatever reason. Thus, the employer usually does not know if the time off
was for vacation (i.e. personal and thus deductible from salary/bank) OR
sick (illness that may not reduce an employee's salary). An exempt employee
may attempt to argue that time off for illness should not be deducted from
his or her PTO (i.e., vacation time). These issues are separate from the
fact that PTO is usually in the neighborhood of 20 days, whereas, vacation
for new employees is approximately 10 days. Thus, an employee who quits
after the first year without taking a day off is entitled to PTO-vacation
pay for 20 days, rather than 10 days if the employer maintained a separate
vacation/sick leave policy.

After reviewing the DLSE and court positions on PTO, vacation, sick leave,
and deductions from exempt employees' salaries, our Firm has taken the
conservative position that having a PTO policy that is not properly drafted
may expose the employer to liability should the employer decide to deduct
from a PTO/vacation bank. An employer utilizing a PTO policy faces even
greater exposure should it decide to "DOCK" an EXEMPT employee's
compensation for exhausting the PTO for reasons related to an illness.

The language in the materials uses the term "MAY" (as in "it is a
possibility") that exposure may occur should an exempt employee challenge
the docking of a PTO bank. There has been no actual case interpreting the
new rules set out in the Conley decision issued in 2005 as it relates to
employers with PTO plans rather than separate vacation and sick leave
policies. However, due to the exposure that violating vacation banks -
accrued wages - brings to a company we have decided to err on the side of
caution until more guidance comes out.

Without reviewing your PTO policy I am not able to provide you with a more
detailed analysis as to how the DLSE interpretation and Conley decision
impacts the administration of your vacation and/or leave policies for your
exempt employees. Please note that non-exempt (hourly) employees are not
impacted by this discussion - only exempt employees.

It sounds to me like the firm is taking the extremely conservative approach as some employers with PTO policies may not specify that the leave may be used for illness as well and hence be treated as vacation only. Of course the goal of corporate counsel is to keep the employer out of litigation and no one is going to sue you because you gave them unlimited sick days off with pay and only docked PTO when they took pre-approved and requested vacation. That doesn't mean that is what the law requires or even that it is a fiscally responsible policy but if your goal is to make sure no employee ever files a claim with the DLSE, a policy like that would do it.