In a remarkable development, California’s Labor Commissioner has reversed its longstanding position that employers may not reduce exempt employees’ salaries during temporary furloughs.

Employers frequently consider this option – formerly available only to public employers – when looking for ways to reduce costs during an economic slowdown. The change came in an opinion letter by Robert Roginson, Chief Counsel for the Labor Commissioner. Addressing an employer’s plan to reduce scheduled workweeks from five to four days, the letter found that California law is based on federal regulations permitting “a bona fide fixed reduction in the salary of an exempt employee” that actually reflects a temporary change in workdays an employee is expected to work. Reducing both non-exempt (hourly) employees and exempt employees’ paid time at the same level is strong evidence that a reduction is – in fact – “bona fide.”

A copy of the Opinion Letter is attached to this update and may be downloaded HERE.

The opinion is not binding on state or federal courts, which can reach their own conclusions on legal issues. Labor Commissioner attorneys and hearing officers, on the other hand, will be required to follow it. Moreover, because the letter is well-reasoned and not closely tied to a specific factual situation, it is far more likely to receive deference from state courts in wage claims.

Richard Rybicki is an attorney with Employment Law Advocates, a Professional Corporation, whose practice focuses on representing management in labor and employment matters. Mr. Rybicki can be reached at (707) 222-6361 or rrybicki@eladvocates.com.

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