California DLSE Approves of Simultaneous Reduction of Workweek and Salary of Exempt Employees

In a much-anticipated opinion, on August 19, the California Division of Labor Standards Enforcement (DLSE) aligned itself with federal law by allowing for the simultaneous reduction of a an exempt employee’s workweek and salary without calling into question whether the employee is paid on a “salary basis” for overtime exemption purposes.

The question presented to the DLSE was whether an employer, when faced with a difficult economic environment, can reduce its employees’ workweek from five days to four days and simultaneously reduce their salaries by 20% or some other proportion, without running afoul of the salary basis test for application of the white-collar exemptions from overtime requirements.

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