In an attempt to clarify its stance on the furlough of exempt employees, the Division of Labor Standards Enforcement ("DLSE") released an opinion on August 19, 2009, stating that employers may furlough employees under Wage Order 4 and reduce their workweek from five to four days in an attempt to cope with significant but temporary economic difficulties, without losing the employees' exempt status. Wage Order 4 includes employees in professional, technical, clerical, mechanical and similar occupations. In addition, employers may reduce the salary of their furloughed employees proportionately while maintaining exempt status, as long as the reduced salary does not fall below the minimum salary rate required by California Labor Code §515(a) for exempt employees, which is two times the state minimum wage for full-time employment (40 hours per week).
California employers should be aware that the opinion does not give a green light to all partial-week unpaid furloughs and that the courts may consider, but are not bound, by the terms of opinions issued by the DLSE. In addition, although a furlough under the circumstances described in the opinon letter may not destroy an employee's exempt status under California law, the same may not be true under the Fair Labor Standards Act. Employers may want to seek counsel regarding decisions related to deductions from exempt employees' salary rate, the length of time those deductions may last, and the frequency of the salary adjustments.