On August 19, 2009, in response to the current economic downturn, the California Labor Commissioner published an Opinion Letter which provides employers with an option to laying off their exempt employees; furloughs.

Under the Labor Commissioner’s Opinion Letter, it is now lawful for California employers to reduce the work hours of their exempt staff, with a commensurate reduction in salary. California law now permits employers to temporarily reduce an exempt employee’s salary, with a commensurate reduction in hours, without jeopardizing the employee’s overtime exempt status, so long as employee still meets the minimum requirements for exempt status, such as wage ($2,773.33 per month) and duty requirements.

Previously, a 2002 Opinion Letter provided that a reduction of an exempt employee’s salary pursuant to a corresponding reduction in hours was a violation of California law. The August 19, 2009 Opinion Letter reverses this interpretation of California law. It is now permissible for employers to temporarily reduce exempt employees’ salaries when their hours are reduced without affecting the employees’ exemption status.