Workplace: California labor commissioner approves temporary pay reduction for exempt workers

Here is some good news for California employers. The California Labor Commissioner has just published an Opinion Letter which provides employers with

much needed relief during these difficult economic times. Here is what happened and how you can take advantage of the ruling.

With a slowdown in business, many companies are looking for ways to cut costs, while minimizing the negative effect on their employees and customers. To avoid laying off salaried exempt employees, employers may prefer to reduce their work hours with a commensurate reduction in salary. The affected employees also would likely view this more favorably than an outright layoff.

The California Labor Commissioner previously ruled that doing so would cause the employee to be deemed overtime eligible (and possibly entitled to back overtime wages). However, the Labor Commissioner’s office has revisited the issue and has issued a much more employer-friendly opinion.

California employers have to follow both federal and state wage hour laws. On the federal side, the U.S. Department of Labor and several federal courts had concluded that this type of arrangement does not violate the federal wage law known as the Fair Labor Standards Act.

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Richard S. Rosenberg is a founding partner of Ballard Rosenberg Golper & Savitt LLP, a management side labor law firm in Glendale. Rosenberg was recently selected as one of the 25 best lawyers in the San Fernando Valley. He may be reached at (818) 508-3700 or rrosenberg@brgslaw.com

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