In Rhea v. General Atomics, ___ Cal.App.4th ___  (July 21, 2014), the California Court of Appeal (Fourth Appellate District, Division One) affirmed the ruling of the San Diego County Superior Court (Judge Strauss) in favor of defendant on its motion for summary judgment.

Plaintiff was an exempt, salaried employee of defendant employer. Like other exempt employees, plaintiff accrued an “annual leave” which she could use to take paid time off for any reason, including vacation, sickness, medical appointments, family obligations and leisure pursuits. However, defendant also required that exempt employees use their annual leave hours when they were absent from work for partial days or full days. Accordingly, plaintiff filed a class action on behalf of exempt employees who were subject to annual leave deductions for partial-day absences of less than four hours. The complaint alleged causes of action for, among other things, illegal wage deduction, forfeiture of vested vacation wages, and failure to pay overtime. The trial court granted defendant’s subsequent motion for summary judgment and plaintiff appealed.

The appellate court agreed with the trial court.  First, the court noted that under Conley v. Pacific Gas & Electric Co., 131 Cal.App.4th 260 (2005), California law does not prohibit an employer “from following the established federal policy permitting employers to deduct from exempt employees’ vacation leave, when available, on account of partial-day absences.” Thus, the court disagreed with plaintiff’s argument that requiring employees to use annual leave for partial-day absences constituted a forfeiture of vested wages. Defendant “does not take away or reclaim vested annual leave when an employee is absent for a partial day; it merely requires that the employee use the annual leave under the terms and conditions that it has created,” which it is permitted to do. Nor was plaintiff able “to point to anything establishing that under the salary basis test, as applied in California, it is illegal to require an employee to use vacation or annual leave time for a partial-day absence.”  The court further rejected plaintiff’s argument that defendant’s practice amounted to an impermissible shifting of wages that an employee has already earned to cover defendant’s duty to pay wages for the period of the employee’s partial-day absence, as defendant paid all of the wages that it was obligated to pay during an employee’s partial-day absence.  Finally, the court disagreed that Conley limited deductions of annual leave for partial-day absences only when the absence is four hours or longer.