Blog Post: "Yes, You Can Reduce an Exempt Employee's Pay" says the DLSE

We have just recently learned that the DLSE (Division of Labor Standards) has issued an opinion letter which, in plain English, say, “we’re changing our minds…temporarily."  Do we really need more reasons for confusing interpretations of the labor law?  But wait—this appears to be in the favor of the employer!  Do we dare believe?

While an opinion letter by the DLSE is definitely not “law” we as employers frequently refer to these opinion letters to help interpret otherwise very confusing legalese-type language of wage and hour laws—especially for those of us in California—we have to keep those employment law lawyers employed, right?  So, this opinion letter represents a change in what we have come to know and love about the DLSE—the opinion is that an employer may reduce, on a temporary basis, an exempt employee’s salary if it is in connection with a reduction in hours without jeopardizing the employee’s exempt status—did that make sense?  In plan in English, if an employer is looking to cut costs, like so many of us are in these challenging economic times, a reduction in pay that is in direct correlation to a shortened workweek, will not get you in trouble as far as your exempt employees are concerned.

A few things worth taking note, or to remember:  the reduced schedule and pay must be temporary, yet fixed, i.e., the reduction is for 3 months and is for a regularly set 4-day workweek (example only), the salary requirements for exempt employees remain the same (two times minimum wage in California, which is currently $640/week) and the employee must still meet the duties test for the exemption.