From the Hotline: Exempt California Employee and Negative PTO Balance

Question: When an exempt employee has a remaining paid time off (PTO) balance of two hours, but takes a full day off, how do we adjust the employee’s pay for that one day? What are the regulations regarding the use of four-hour increments only, and do they differ for California?

Answer: General interpretation of the regulations is that when an exempt employee has only two hours of PTO available, but takes a full day off, the employer should pay the employee for the full day in order to comply with the federal Fair Labor Standards Act (FLSA). The two hours of PTO may be deducted from the employee’s accrued paid time off, but full wages should be paid for the day, even though the employee performed no work that day. It is also permissible for the employer to debit the employee’s PTO bank for the six hours, leaving the employee with a negative balance in the PTO account.

The only time that partial day deductions are permissible under the FLSA is for time occurring in the first or final week of an exempt employee’s employment or for unpaid leave under the Family and Medical Leave Act (FMLA). This information is provided by the federal FLSA regulations and available at

With respect to partial day docking from a California exempt employee’s paycheck, a California Labor Commissioner opinion letter dated November 23, 2009, states, “Accordingly, while it is impermissible to deduct from a salary for partial day absences, the Company may deduct from leave time balances in connection with absences due to vacation or sickness of less than a full day under a bona fide plan providing for such leaves without the employee losing his or her exempt status.” This opinion letter reinforced the allowance to deduct from the leave balance accounts (and take the account negative), but not to take actual money away from the employee.