Supplemental Disability Pay Does Not Affect Salary Basis Test

Generous employers sometimes supplement California's state disability insurance coverage with salary continuation programs. No good deed goes unpunished? Not this time. Employees brought a class action alleging unpaid overtime. They claimed they were misclassified as "exempt" because the employer's salary replacement program resulted in impermissible "deductions" from their salary during the initial week of "disability." The complaints were that the salary continuation program did not fully replace salary, that payments were delayed because the employer required the employee to present the SDI check so the payments could be coordinated, and other perceived flaws. The legal issue was whether the salaries could be reduced under the "bona fide" disability plan exception to the salary basis required.
The Court of Appeal turned back all of the plaintiffs' arguments. The Court also rejected the DLSE's enforcement position that reliance on SDI was improper under the "bona fide" plan exception.
The case is Sumuel v. ADVO, Inc. and the opinion is here.