Legal Question in Business Law in California

As a practical matter, yes, but if this were a bar exam question, quite a bit could be written on both sides of the argument. The employer's right to dock your pay probably flows from a combination of your admitting that you lost the key and the employer's right to change the terms of your employment, prospectively. The employer's position would be even stronger if it had a written policy on this, which many do. There is a theoretical argument that the answer should be "no," but it is a loser except in getting a law student full credit on an exam.