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Home | Weekly E-Alert Articles | Can You Deduct A Single Hour of Sick . . .

Can You Deduct A Single Hour of Sick Leave From An Exempt Employee's PTO Bank?
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Maybe—but it depends on how your paid time off benefits are structured.

In California, there are two types of paid time off: time that "vests" and is considered to be part of an employee's wages, and time that does not vest.

Vacation benefits are of the type that vests, and employees cannot forfeit earned vacation time for any reason. Sick leave, if accrued separately from vacation time, does not vest and is not considered part of an employee's wages. If vacation and sick leave are accrued together under a single PTO plan, then all PTO time vests and is considered a wage.

Does your paid time off policy comply with California law for both exempt and non-exempt employees? Find out by joining us on August 5 for the 90-minute audio conference: Paid Time Off: How to Establish and Maintain a Successful PTO Program to get practical, how-to advice on bringing your paid time off policies up to snuff.

In 2005, a California appellate court ruled that if an exempt employee takes 4 or more hours of personal time off, the employer can make a partial-day deduction from the employee's vacation or PTO bank. Personal absences of less than 4 hours, however, cannot be deducted.

But what if the employee is absent due to illness?

If sick leave benefits are accrued separately from vacation benefits, then the time taken off by an exempt employee due to illness can be deducted in increments as small as one hour. If, on the other hand, an exempt employee simply earns a combined PTO benefit, then only those illness-related absences of 4 hours or more can be deducted from the employee's PTO bank. In other words, whatever the reason for the absence, absences of less than 4 hours cannot be deducted from an exempt employee's PTO bank (one exception: intermittent leave under FMLA/CFRA may be deducted in smaller increments).

For non-exempt employees, in contrast, illness-related absences can be deducted from either a separate sick leave or PTO bank in increments of one hour or more.

Put An End To PTO Headaches

Two out of three employees who fail to show up for work aren't staying home because they're sick. A recent survey found that 21 percent miss work to handle "family issues," another 18 percent are dealing with "personal needs," and the rest say they're stressed or simply need a day off.

If you're already operating a lean workforce in this tough economy, every missing worker cuts productivity and increases the strain on your employees who show up for work as promised. And, your bottom line takes a hit as well, with $660 in added costs per employee every year due to unscheduled absences.

Moving from a traditional time-off program to a PTO program can help you better plan for and manage worker absences—but there are some legal pitfalls to watch out for as you make the transition.

Join us on August 5 for an in-depth audio conference on setting up a PTO program—specifically for California employers. You'll learn:

  • The primary reasons your workers take sick leave when they're not ill

  • Why you should consider introducing a PTO bank that combines sick days with holidays, vacations, and "mental health days"

  • The pros and cons of PTO vs. traditional time-off policies

  • How your time-off policies may be affected by state and federal laws (e.g., the Family and Medical Leave Act) and by your insurance benefits (e.g., short-term disability)

  • The options you should consider when a worker has exhausted his or her leave but still needs time off due to hardships or emergencies

  • How to handle PTO carryover (and how to cash out unused days when an employee terminates)

  • The best techniques for communicating new leave policies to your workers and encouraging their buy-in

  • Whether capping and "use it or lose it" practices are legal

  • When and how to change accrual rates

Register now »

Find out more »

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