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California Exempt Salary Furlough Laws

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Furloughs are a one-time solution to a budget deficit.

Many California employers, including the State of California, are choosing to use furloughs to achieve temporary budget reductions without permanently reducing their workforce. A furlough is unpaid time off from work that can be voluntary or mandated. An employer may close the offices during a furlough, or employees may take furlough at staggered times to allow the business to continue operating as normal. Organizations must be aware of additional challenges concerning exempt employees when considering implementing a furlough.

  1. What Is an Exempt Employee?

    • Employees must meet a salary test and a duties test to be properly considered exempt. In general, they must earn at least $455 per week in salary. Employees must also perform certain kinds of work, including duties that directly relate to the management of the organization or that require specialized training and advanced skill sets (for example, computer professionals or attorneys). Exempt employees are not subject to overtime requirements. If such employees perform any work-related duties during a work week, they must be paid for that entire week. An employer may not deduct from an exempt employee's salary for absences caused by the company.

    Partial Day Furloughs

    • If an exempt employee works a portion of the day (even an hour or less), he must be paid for a full day's work and cannot be required to furlough for the remainder of the day. Ideally, exempt employee furloughs should be taken in full-day, whole-week increments.

    Single-Day Furlough

    • An exempt employee is entitled to receive full pay for any week in which she perform works. Therefore, the only way to furlough exempt employees while maintaining their exempt status is to require the furloughs be taken in full-week increments. A full week of continuous furloughs would place a heavy burden on employers' operations and employees' personal finances. A single day furlough is permissible, however, the employee loses her exempt status for the week in which the furlough occurs. This means that she is eligible for overtime for any hours actually worked over 40 in the week (remember, they are only scheduled to actually work 32 hours because of the furlough). Employers can direct employees not to perform additional work during the week, but the statute places the burden on the employer not to "suffer or permit" overtime to occur.

    Spreading the Cost of the Furlough Over Multiple Paychecks

    • To minimize the financial impact to employees, an employer may want to spread out the deduction from a one-day-a month furlough across all paychecks for the month. Legally, this is permissible, but it may not be advisable. If an exempt employee has his pay deducted, he loses his exempt status during the week the deduction occurs. In this scenario, instead of losing the exempt status on just one week of the month, the employee would lose his exempt status every week. Consequently, the employer would be responsible for paying overtime for any hours worked over 40 in a week. In three weeks of the month (the weeks the furlough was not actually being taken), the employee would already be scheduled to work 40 hours. This means that any work over and above 40 hours would have to be compensated at overtime rate.

    What if an Exempt Employee Works on the Furlough?

    • If an exempt employee works on the unpaid furlough day, it automatically entitles the employee to be paid for the entire day. Direct exempt employees -- in writing -- not to perform work on furlough days. This directive should even include seemingly insignificant tasks such as checking a BlackBerry for email.

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  • Photo Credit Cutting budget deficit image by chasingmoments from Fotolia.com

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