Can You Deduct Pay From a Salaried Employee in California?

In California, you can deduct pay from a salaried employee only in a narrow set of situations, and only if the employee is properly classified as exempt in the first place. The salary basis rule guarantees exempt employees their full predetermined salary for any week they do any work, so most pay reductions are off the table. The lawful exceptions are specific: full-day personal absences, full-day sick absences after paid leave is exhausted, the first and last week of employment, unpaid leave under the Family and Medical Leave Act, certain disciplinary suspensions, major safety violations, and offsets for jury or witness fees. Everything else — docking for a slow afternoon, a missed sales target, a cash drawer shortage, or a snow day — generally violates California law.

Why Deductions Are Restricted

California’s overtime exemption has two prongs: a duties test and a salary basis test. The salary basis test requires a monthly salary of at least twice the state minimum wage for full-time work.¹ With the state minimum wage set at $16.90 per hour on January 1, 2026, that works out to $70,304 per year.² The federal threshold of $35,568 is not enough on its own in California.

The core of the rule is simple. The predetermined salary cannot be reduced because of variations in the quality or quantity of work performed.³ One hour of work or fifty, the paycheck is the same. California Labor Code section 221 reinforces this by flatly prohibiting employers from recovering any portion of wages already paid.⁴

When a Deduction Is Allowed

Each of the lawful deductions below applies only to employees classified as exempt. For non-exempt hourly employees, the rules are different and generally more permissive about adjusting pay to hours actually worked.

Full-Day Personal Absences

An employer may deduct a full day’s salary when an exempt employee is absent for a full day for personal reasons unrelated to sickness or disability.⁵ “Full” is literal. If the employee answers one client call, replies to a work email, or performs any task that counts as work, the deduction is no longer allowed.

Full-Day Sickness or Disability Absences

Deductions for sick days are tighter. The employer can only dock pay for a full-day sick or disability absence if it maintains a bona fide paid leave plan and the employee has either not yet become eligible or has already exhausted their accrued leave.⁵ An employer with sick leave on the books cannot dock pay for a sick day when the employee still has sick time available.

First and Last Week of Employment

When an exempt employee starts or ends a job partway through a week, the employer may prorate the salary and pay only for the days actually worked.³ This is the one time a partial-week salary is permitted.

Unpaid FMLA Leave

Proportionate deductions are allowed when an exempt employee takes unpaid leave under the Family and Medical Leave Act, and this is the only exception that permits partial-day reductions. If an employee who normally works 40 hours uses four hours of unpaid FMLA leave, the week’s salary can be reduced by 10 percent.⁶

Disciplinary Suspensions for Serious Conduct

An employer may impose an unpaid suspension of one or more full days for serious violations of workplace conduct rules, such as policies against harassment, workplace violence, or drug and alcohol use. The suspension must be in full-day increments, and the written policy must have been distributed to employees before the suspension.⁷ This covers serious misconduct, not performance or attendance issues.

Major Safety Violations

When an employee violates a safety rule meant to prevent serious danger — the regulation gives examples like smoking rules in explosive plants, refineries, or mines — the employer may impose a pay penalty in any amount, not limited to full days.⁷ This is the most flexible deduction available, but it applies only to safety violations of major significance.

Jury Duty and Witness Fee Offsets

Pay cannot be docked when an exempt employee is absent for jury duty or to serve as a witness. The employer can, however, offset the salary owed that week by any jury or witness fees the employee received.⁸ Between the fee and the employer’s payment, the employee still ends up with a full week’s salary.

Deductions That Are Never Allowed

Outside the categories above, deductions from an exempt employee’s salary are almost always unlawful in California. The traps employers fall into repeatedly:

Partial-Day Absences

If an exempt employee works any part of a day, they are entitled to pay for the full day. An employer can require the employee to use accrued vacation or PTO to cover the missing hours, but cannot reduce the salary itself.⁹ Unpaid FMLA leave is the only exception.

Performance or Productivity

Missing a sales target, turning in weak work, or having a slow week is not a basis for docking salary. The prohibition on deductions tied to the quality or quantity of work sits at the center of the salary basis rule.³ Performance problems belong in the disciplinary process, not the paycheck.

Closures and Lack of Work

When the office closes for a holiday, shuts down because of weather, or runs out of work, the employer absorbs the cost. An exempt employee who is ready and willing to work cannot have their salary reduced because no work is available.⁹ A snow day is the employer’s problem.

Business Losses and Operating Costs

Cash register shortages, broken equipment, customer chargebacks, uniforms, and similar business costs cannot be charged against an exempt employee’s salary unless the loss resulted from the employee’s dishonest or deliberate act. California takes a particularly hard line on employers trying to shift routine business losses onto workers.

Garnishments and Tax Levies Are Different

Mandatory withholdings sit outside the salary basis rule. Court-ordered child support, creditor garnishments, IRS wage levies, and California Franchise Tax Board earnings withholding orders must be honored by the employer regardless of the employee’s exempt status. If a wage levy or garnishment is reducing your paycheck, that is a separate legal process with its own exemption calculations and challenge procedures — not a salary basis violation.¹⁰

What an Improper Deduction Costs the Employer

Deductions outside the lawful list are not just reversible mistakes. When improper deductions reflect an actual practice rather than a one-off, the exemption itself can collapse.

Reclassification is the biggest exposure. If a pattern of deductions shows the employer never truly paid on a salary basis, the affected employees are treated as non-exempt for the entire period, which means they are owed overtime they never received. In California, overtime applies after eight hours in a day and after 40 hours in a week at one and a half times the regular rate, with double time after 12 hours in a day.¹¹ For a manager who worked 50-hour weeks for years, the back pay adds up quickly.

The statute of limitations for unpaid wages under the California Labor Code is three years from each violation. Claims brought under the state’s Unfair Competition Law can reach back four years. If the employee was terminated or quit and did not receive all wages owed on time, waiting time penalties also apply: the daily pay rate continues to accrue for each day the wages remain unpaid, up to 30 days. Federal claims under the Fair Labor Standards Act allow liquidated damages equal to the back wages, which can double the total.

Employers can protect themselves through a written policy prohibiting improper deductions, a complaint channel, prompt reimbursement when a mistake occurs, and a good-faith commitment to comply going forward.¹² Where that safe harbor is in place and honored, isolated mistakes will not sink the exemption.

Filing a Wage Claim

An employee whose salary has been improperly docked can recover the money through the California Labor Commissioner’s Office, which operates as the Division of Labor Standards Enforcement (DLSE). The process starts with the Initial Report or Claim, DLSE Form 1.¹³ The form can be submitted online, by mail, or in person at a local DLSE office.¹⁴ Pull together pay stubs, time records, written communications about the deductions, and any employee handbook pages that address pay before filing. The three-year limitations period means claims should not sit.

Retaliation Protection

California law prohibits firing, demoting, suspending, or otherwise retaliating against an employee for filing a wage claim or even voicing an oral complaint about unpaid wages. Any adverse action within 90 days of the complaint creates a rebuttable presumption of retaliation, shifting the burden to the employer to prove a legitimate reason. An employer found to have retaliated faces a civil penalty of up to $10,000 per employee per violation, in addition to reinstatement and lost wages.¹⁵

1
California Legislative Information. California Code LAB 515 – Exemptions From Overtime
2
California Department of Industrial Relations. California Minimum Wage Increase to $16.90 Per Hour on January 1, 2026
3
U.S. Department of Labor. Fact Sheet 17G – Salary Basis Requirement and the Part 541 Exemptions Under the Fair Labor Standards Act
4
California Legislative Information. California Code LAB 221 – Collection of Wages Previously Paid
5
Department of Industrial Relations. DLSE Opinion Letter – Deductions for Partial and Full Day Absences of Exempt Employees
6
eCFR. 29 CFR 541.602 – Salary Basis
7
U.S. Department of Labor. FLSA Overtime Security Advisor
8
U.S. Department of Labor. FLSA Overtime Security Advisor
9
U.S. Department of Labor. FLSA Overtime Security Advisor
10
Internal Revenue Service. Information About Wage Levies
11
California Legislative Information. California Labor Code 510 – Overtime Compensation
12
eCFR. 29 CFR 541.603 – Effect of Improper Deductions From Salary
13
Department of Industrial Relations. Division of Labor Standards Enforcement – Initial Report or Claim (DLSE Form 1)
14
Department of Industrial Relations. Instructions for Filing a Wage Claim
15
California Legislative Information. California Labor Code 98.6 – Retaliation Protections