Around this time of year, many of our subscribers are unclear about whether or how much they need to pay employees for working on what the organization has designated as a paid holiday. Here are a few recent questions and the answers from our legal experts to help clear up the confusion.
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A: Neither the laws of your state nor the federal Fair Labor Standards Act (FLSA) requires you to do so, as long as you have no policy or contract provision that contains such a requirement. Further, FLSA does not require you to pay time and ½ for holiday work, unless an employee works more than 40 hours in the holiday week. You would be wise to create a written policy covering holiday pay.
Q: We’ll have some of our [nonexempt] employees working on a paid holiday, and we’re going to pay them their regular rate plus double time. How does this affect their regular rate of pay that we use to compute their overtime rate?
A: As you know, FLSA requires that nonexempt employees be paid 1 and ½ times their regular rate for all hours worked in excess of 40 per workweek. And, although there is no law requiring them to, many employers offer regular pay plus a premium to employees who work on a scheduled holiday. But FLSA does not require that holiday premiums be considered in calculating the employee’s regular rate of pay.
Q: If an exempt employee works on a paid holiday, should he or she get time and ½ or a “comp day”?
A: An employer can provide an exempt employee with additional compensation, such as overtime, without losing the exempt status or violating the salary basis requirement—so long as the employment arrangement also includes a guarantee of at least the minimum weekly amount paid as salary ($455/week). An exempt employee who is paid at least $455/week can be paid, in addition to overtime, a 1 percent commission on sales or a percentage of the sales or profits of the employer, without losing his or her exempt status. But for nonexempt employees, an employer may not substitute additional time off for overtime pay.
Q: Can we pay exempt part-time employees a portion of holiday pay if they did not work on the holiday?
A: As a rule, exempt employees must be paid their regular salary for any week in which they worked. Assuming the employees in your question receive their regular rate of pay for a holiday week, partial holiday pay is permissible.
Q: Does an employee on FMLA get paid for a holiday?
A: The answer depends on whether you offer holiday pay to employees out on types of leave other than FMLA, such as personal or educational. If you do not provide any non-health plan benefits to those employees, then you need not do so for someone on FMLA. That is the position the Department of Labor took in an opinion letter.
Q: Our policy says you must work the day before and day after a holiday to get holiday pay. What if someone is on FMLA before or after a holiday?
A: [As in the previous question] that depends on how you would treat an employee out on some type of unpaid leave other than FMLA. Note that if you do pay someone on FMLA leave for the holiday, that day doesn’t lengthen their 12-week entitlement.