Short Term Work Absences Can Be Counted Towards Accrued Leave for Exempt Employees

Questions typically arise as to how partial day absences from the workplace will affect annual leave hours for exempt employees. A recent decision from the California Fourth Appellate District Court, Rhea v. General Atomics, 2014 DJDAR 9469 has provided some clarification on this issue.

Facts

The plaintiff is employed at General Atomics in a salaried, exempt level position. General Atomics’ employment policies allow for exempt employees to accrue annual leave which the employees can utilize to take paid leave off work for any reason, including vacation, sickness, medical appointments and family obligations.
General Atomics requires its exempt employees to use accrued leave when the exempt employee is absent from the workplace for full or partial days. General Atomics had two policies related to the use of accrued leave. Initially, exempt employees were required to use accrued leave only if the partial day absence was four hours or greater. Subsequently, the policy was changed to deduct leave for absences from the workplace of any length.

Analysis

The plaintiff argued that under California law, vacation leave is treated as “wages” or “deferred compensation.” She further argued that California prohibits the forfeiture of earned wages, including vacation pay and therefore, any deduction of leave for a partial day absence was an impermissible forfeiture of wages. The court agreed with Plaintiff’s first two points but found that her argument failed with respect to her conclusion. Beginning with the general premise that an “employer is generally permitted to control the conditions under which vacation or annual leave benefits may be exercised…” the court concluded that an employer’s policy of requiring an employee to utilize accrued leave for partial day absences does not constitute a “take away” or reclamation of leave benefits. The court held that all leave time earned has been received even if the employee is required to use leave time when he or she is unable to work. The requirement to use the leave “neither imposes a forfeiture nor operates to prevent vacation pay from vesting as it is earned. All it does is regulate the timing of exempt employees’ use of their vacation time, by requiring them to use it when they want or need to be absent from work.”

The court further dismissed Plaitniff’s argument that General Atomic’s policy of deducting leave for partial day absences constituted impermissible wage shifting. Plaintiff argued that by using accrued leave earned in previous pay periods to pay employees for partial day absences in the present pay period, General Atomic was violating the law. The court found that this argument was incorrect because Plaintiff failed to prove that General Atomic failed to pay all of the wages it was obligated to pay during an employee’s partial day absence, thus finding there was no shortfall wages in wages that needed to be made up in the first instance.
Lastly, the court rejected Plaintiff’s argument that even if the court did find that partial day absences could be deducted, they had to be absences of four hours or more.

The court disagreed with the plaintiffs on all fronts holding that an “employer is generally permitted to control the conditions under which vacation or annual leave benefits may be exercised…”

Conclusion

The Rhea case demonstrates that an employer can prevail in labor lawsuits if it has implemented sound policies that comply with California labor laws. Due to the voluminous and complex nature of such laws, it is important for employers to seek legal counsel in reviewing and drafting such policies. Robert Forouzandeh along with other attorneys at Reicker, Pfau, Pyle & McRoy, LLP have counseled numerous employers in developing and implementing sound employment policies and have represented employers in numerous employment litigation matters, including class actions. Please contact Robert to schedule a consultation on such matters.

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