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June 25, 2001
Warning Brings Change in Furlough Plans
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least four hi-tech employers in California's Silicon Valley have revised their plans to force some employees to take unpaid leave or vacation time in the first week of July, after a state labor official warned that such furloughs could cause legal problems.

Several companies had announced mandatory time-off plans in recent months as a way to cut costs without resorting to layoffs.

Adobe Systems, Network Appliance, Sun Microsystems and Xilinx had planned to require employees to take off the two days before and the two days after the Independence Day holiday on July 4, according to the San Jose Mercury-News.

Employees would have had to use vacation time for the days off or go unpaid.

But since learning of the labor official's letter, Adobe, Network Appliance, and Xilinx have made their programs optional for salaried employees, the newspaper reports. Sun lawyers are reviewing the company's week-off plan.

The chief counsel for the state Division of Labor Standards Enforcement issued an opinion May 30 that said the plans, if applied to some salaried employees, could actually end up requiring the companies to pay more, not less.

That's because forcing salaried workers to take vacation or time off without pay could trigger a state law that would then make them eligible for overtime pay.

Now, Network Appliance will ask most of its Sunnyvale employees to take the July 2 week off, but those who choose not to now may work with their managers to choose four other days to take off before the end of July, said spokesman Adam Trunkey.

At Xilinx, employees now may choose to work at home during the first week of next month. That way, the company still saves money by not having to cool and light the building during that week, said spokeswoman Ann Duft.

Adobe will require hourly employees to sit out the week, but salaried workers in California are being asked, not required, to take the days off. The entire executive team will be taking the days off.

Intuit had planned to have "non-customer-facing employees" take vacation on the two days following Independence Day but has since made the time off optional for salaried employees in California, said spokeswoman Michele Cerza.

The widely disseminated letter, from the state Division of Labor Standards Enforcement's Chief Counsel Miles Locker, said that shutdowns of less than one month that forced salaried workers to take unpaid or vacation leave on certain days could force their companies to pay them overtime to which they wouldn't ordinarily be entitled.

That's because of a technicality of state law that uses an employee's monthly, not weekly, salary to help determine whether he or she is eligible to receive overtime pay, said Labor Standards spokeswoman Susan Gard.

If a salaried employee lost his or her overtime exemption, the employer would then have to pay the worker overtime for every hour worked beyond eight a day. Gard said the overtime-pay requirement would last only for the month or months in which the forced time off was taken. But labor lawyers worried that the conversion to hourly status could be ongoing, or even retroactive to Jan. 1, 2000, the effective date of AB 60, the law that reinstated overtime after eight hours worked.

To read the Mercury-News story, click here.
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