Holiday Shutdowns and Exempt Employees
November 7th, 2008 Posted by CaraWith the current economic crisis, many employers are considering giving workers additional unpaid time off during the holidays. This includes giving workers Friday, November 28 (the day after Thanksgiving) and/or Friday, December 26 (the day after Christmas) off without pay.
Other employers are considering closing for an entire week between Christmas and New Years.
However, these tactics raise issues around the payment of exempt salaried employees that every employer needs to be aware of.
Hourly employees, of course, need not be paid during these holiday closures. Non-exempt salaried employees also need not be paid for this time. However, the regulations regarding paying salaried exempt employees are more complex.
In many cases exempt employees must be paid for such closures, according to Angela Stone of the SHRM, “If an exempt employee works any portion of a workweek, he or she must be paid for days in which they are ready, willing and able to work.” Stone adds that a deduction cannot be made for time when no work is available.
The Society of Human Resource Management or SHRM is headquartered in Alexandria, Virginia.
Under federal regulations, docking the salaried exempt employee’s pay for such a temporary layoff may change the employee’s status from exempt to non-exempt. This would effectively make the employee eligible for overtime pay for the past, as well as the future.
An exempt employee need not be paid for any payroll week in which he or she performs no work at all. If the company is shuttered for an entire payroll week, and the exempt employee performs no work at all during that period, then he or she can legitimately be unpaid during that period. However, if the exempt employee spends even one hour (or a portion of an hour) working during that payroll period, he or she must be paid their entire salary for the week.
Employers can, of course, dock an exempt employees salary if the employee misses work for one or more days due to illness or to attend to personal business. This is an entirely separate situation from a holiday closure or temporary shutdown of the business by the employer.
In many cases, employees who have vacation or personal time can be required to use it for holiday closures, providing the employees have adequate notice. However, this varies by state. (And, of course, paying an employee for vacation time instead of salary doesn’t save the company any money.)
In California, for example, the regulations regarding holiday shutdowns require that employers let workers know at least 90 days in advance, that they will be required to use vacation or personal time for such closures.
Last 10 posts by Cara
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Tags: alexandria virginia, Christmas, closure, day after christmas, day after thanksgiving, december 26, economic crisis, employee, exempt, exempt employee, holiday, holiday closures, hourly, HR, Human Resources, lay off, layoff, New Years, news, non-exempt, overtime pay, paid, payroll period, personal, salaried employees, salaried exempt employees, Salary, SHRM, shut down, shutdown, society of human resource management, temporary, thanksgiving, time, time off, unpaid, unpaid time, Vacation, Virginia, workweek
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Posted by: Eric
For an exempt employee who is paid on a monthly basis rather than a weekly basis, and their contract states month to month, can they be laid off for a single week as stated above, or must they be paid unless laid off for the entire month?
Posted by: Amelia
Hi Eric! Even if the exempt employee is paid on a monthly basis, the information in this article still applies. If the employer is closed for an entire payroll week, exempt employees need not be paid.
However, when you mention a contract, that gives us pause. It is possible that this worker is actually an independent contractor, not an employee. Or, it is possible that there is a labor contract in place. In that case, it would depend upon the specific provisions of that contract. For more info, post your question on our sister site at http://www.laborlawtalk.com. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Ian
Hello,
I am a full-time, exempt, salaried, employee in California. I signed a 3 month temporary employment contract, but my bimonthly paychecks are based on the annual salary I was quoted. (I am not an hourly employee)
This Thanksgiving, our office was closed on Thursday but open the other 4 days, which I worked. I was not paid anything for the holiday. The way I am interpreting this article, I was not paid properly. Nothing in the contract I signed mentioned anything about not receiving holiday pay that other employees received.
Can you confirm that I am correct? Is there a specific law or code that is being violated?
Thanks.
Posted by: Amelia
Hi Ian! It is not clear that any law or code is being violated here. Full-time employees do not usually sign a temporary employment contract. Usually, workers who sign a temporary employment contract are independent contractors, sometimes called consultants. (Of course, a lawyer would have to look at your employment contract to determine which you are.) Independent contractors are usually not entitled to any benefits, including group health insurance, vacations and holiday pay. Your contract may well specify that you will only be paid for days worked.
It is possible that you are a temporary employee. In that case, you would likely have received and signed off on an employee handbook that details the policy for holiday pay. As an exempt employee, you would be entitled to payment for the entire week under the federal FLSA or Fair Labor Standards Act. Sorry we can’t be more helpful, but only an attorney looking at your contract could make that determination. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Ian
Thanks for the quick reply, Amelia.
I’ve read the handbook, and it does say that “Temporary Employees” are not eligible for benefits, but my job responsibilities and restrictions are not at all similar to those of an independent contractor. Also, Medicare and SS are withheld from my paycheck, and I understand that is not the case for independent contractors. My pay stub and tax form say Salary and exempt on them, and the handbook says “Exempt employees will be paid holiday pay for their regularly scheduled hours worked on the day the holiday falls on.” I analyze investments, make budgets, submit letters of intent, and negotiate construction contracts on behalf of the company, which I think makes me “Administrative” and therefore exempt.
To determine how much we are owed per pay period, they convert our salary to an hourly rate and multiply by the number of hours in the pay period. (Don’t forget I am salaried and not hourly. Everyone’s pay is calculated this way for some reason.) I did the math, and if I work 8 hours a day, 5 days a week, and 52 weeks per year at the hourly rate on my pay stub, I get my quoted annual salary to the exact tenth of a cent. So if they don’t pay me the hours for Thanksgiving, I am being paid as an hourly employee, and not getting the salary I was promised.
All I want to do is find some law or something to show HR that justifies my complaint. Where can I find info on exempt employees in the FLSA? I thought exempt meant it had nothing to do with me.
Thanks for your help and great blog!
Posted by: Amelia
Hi Ian! Because the employer is withholding medicare and social security payments, it does sound like you are genuinely an employee and not an independent contractor. It is possible that you are a salaired non-exempt employee, entitled to overtime. However, you seem to think that you are exempt, so we’re going to assume that you are right.
The hourly method of calcuating wages that your employer uses is very common for computerized payroll and completely irrelevant to your exempt or non-exempt status. As a salaried exempt employee, you are entitled to your weekly salary.
Most provisions of the FLSA still apply to exempt employees. They are merely exempt from the overtime and minimum wage requirements. In fact, the FLSA has very complex regulations regarding exempt employees.
The FLSA Fact Sheet that you want is at: http://www.dol.gov/esa/whd/regs/compliance/fairpay/fs17g_salary.pdf
Check out the section under “Salary Basis Requirement” and “Circumstances Under Which the Employer May Make Deductions from Pay.” Exempt employees generally must receive the full week’s salary for a week in which they perform any work at all. An employer can make a deduction from an exempt employees pay (under some circumstances) if the employee calls in sick, takes time off for personal business, or if the employee does no work at all during the entire payroll week. But an exempt employee who is ready, willing and able to work, and works part of the week, must be paid for the entire week, even if there is no work available on one or more days.
California law contains a similar provision that a salaried employee who does any work during the week, must be paid his or her entire weekly salary. Contact the California Dept. of Labor Standards Enforcement at http://www.dir.ca.gov/dlse/dlseWagesAndHours.html. If HR still doesn’t see it your way, use that link to file a wage claim with the state of California. Their enforcement is generally faster and better than that of the U.S. Dept. of Labor. HTH and again, thanks for reading the blogs!~ Amelia & Cara
Posted by: Ian
Thanks. Without a doubt I’m exempt.
The fact sheet outlines it pretty clearly. Hopefully I won’t have to file a claim. You’ve been very helpful.
Posted by: Amelia
Hi Ian! Glad that you found it helpful. Let us know if there is anything else we can do. ~ Cara & Amelia
Posted by: Bonnie
I am a salaried exempt employee in Michigan and was told by my employer that I could not be paid for any holidays if they occurred during my first 90 days of employment. Is this legal? They actually deducted from my check the holidays I did not work because the office was closed.
Posted by: Amelia
Hi Bonnie! No, this is probably not legal under federal law if you are genuinely an exempt employee. This policy would be entirely legal for hourly employees.
Interestingly, the employer does not have to offer benefits such as holiday pay and can set the policy regarding them. So the employer does not have to pay you “holiday pay.” But the employer does have to pay your regular salary for the entire week.
Under the federal FLSA or Fair Labor Standards Act, an exempt employee must usually be paid for the full week’s work if they do any work at all during the week. If the employee is ready, willing and able to work, and no work is available, then the exempt employee must be paid for that day. This is the situation that occurs when a place of employment is closed on a holiday.
Of course, the employer could have required that you work on the holiday, since you were being paid and not eligible for paid holidays. But the employer did not.
Some salaried employees are non-exempt. They must be paid overtime when they work more than 40 hours per week, and can be docked when they work less than 40 hours per week. If you were a non-exempt salaried employee, this action would be appropriate. In fact, by not paying you when you work fewer hours, the employer may well be changing your status from exempt to non-exempt.
Read more about the FLSA and exempt employee’s payment at: http://www.dol.gov/esa/whd/regs/compliance/fairpay/fs17g_salary.pdf
If you show this document to your employer, and they still refuse to pay your entire salary for those weeks, you could file a wage claim with the U.S. Department of Labor or the Michigan Department of Labor and Economic Growth. You can also post questions on our sister site at http://www.laborlawtalk.com. HTH, and thanks for reading the blogs!~ Amelia
Posted by: steve71971
I work for a small township in Pennsylvania. The head mechanic is the shop steward. I contend since he is a first level supervisor, he should not be in the same bargaining unit as the rank and file employees. More importantly, he should definitely not be negotiating the contract for rank and file employees. What do you think?
Posted by: Amelia
Hi Steve! We don’t see this as a huge conflict of interest. Presumably, the head mechanic is working under the same contract, so he has a vested interest in getting more benefits. And, usually the members have to ratify or agree to any contract, after it is negotiated and before it is signed. So if the majority of the employees do not agree to the contract the head mechanic negotiates, they need not approve it.
More importantly, it doesn’t really matter what you or we think on this issue. Most unions have rules regarding who can and cannot be shop steward. As long as the head mechanic is not breaking those rules, there is little you can do. If you feel that the law has been violated, by all means contact someone higher up in the union or the authorities. HTH, and thanks for reading the blog!~ Amelia
Posted by: Jeff
I am an exempt employee. My company is forcing me to take one week of unpaid leave. Nowhere does it say I am being temporary laid off. I am just required to take this week of leave. The business will be open during this time. Since I am ready, willing and able to work, why is this legal?
Posted by: Amelia
Hi Jeff! As long as the exempt employee does no work at all during the payroll week, he or she can be unpaid, under the FLSA or federal Fair Labor Standards Act. If the employer was furloughing you for a few days, they would have to pay you. HTH, and thanks for reading the blogs!~ Amelia
Read more about this at: http://blog.laborlawcenter.com/2009/02/11/exempt-employee-furlough-and-fairpay-regulations/#more-6975
Posted by: Danielle
We are a Virginia small business. We are closed this Friday to recognize the 4th of July holiday, which is one of the 7 holidays that our company gives its employees paid. One of our employees called in sick last Friday. He has plenty of accrued time to use to get paid for this day. However, our owner is forcing him to work this Friday on the holiday and use the “holiday pay” for last Friday’s sick day. Is this allowed?
Posted by: Amelia
Hi Danielle! This tactic is not an indication of great management skills, it is unorthodox, but it is lawful.
There is no law that any employer must grant paid holidays. If the employer does grant paid holidays, the employer establishes the policies regarding them. Generally it is not good management practice to use benefits punatively.
The employer has every right to require that this employee (or any employee, or every employee) work on July 3, July 4 or any day of the year. An employee who refuses may be terminated.
If the employer took this action against the employee due to his race, color, sex, religion, etc. that would be illegal discrimination. But he seems to be taking this aciton against the employee due to an unacceptable absence.
Federal law requires that the employee be paid for the day that he or she works. It does not specify whether that day be counted as wages, vacation, sick pay or holiday pay. Obviously the employer feels this employee’s absence last week was not justified. There are probably better ways to handle this situation, but again, the owner’s actions are legal. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Joyce
I am in the state of Texas and would like to know if it’s legal for a State Agency who has listed in the policies that July 4th is one of 9 paid holidays.
Other offices within the agency, in other citeis in Texas, will be closed except for the one in which I work. The supervisor in charge of this office says that since the holiday falls on a Saturday, and even if it is one of our paid holidays, we will be required to work Friday, the 3rd, without holiday pay even though our main office and all other office will be closed. Will they have to give us another paid holiday since we are supposed to have 9 paid holidays as stated in the policy????
Posted by: Amelia
Hi Joyce! It may be legal, but it is highly irregular. Sounds like your supervisor is a real “cowboy” if you know what we mean. If the agency or state has an HR department, contact them by email or phone and check this out.
There is no law that employees must be given July 3 off when July 4 is a paid holiday. Unless there is a specific business reason for this that you haven’t mentioned, it doesn’t make sense that your location is being treated differently.
If you are required to work on Friday then theoretically you would be entitled to holiday pay for Saturday, even though you are off.HTH and thanks for reading the blogs!~ Amelia
Posted by: Tom
GM is offering some exempt salaried employees the option of receiving 75% of their normal salary during periods of temporary unemployment. There are a few strings attached. No other payed work is allowed, and they must be available to return to work on short notice.
These employees do not apply for unemployment compensation.
Wouldn’t GM be better off having these people draw unemployment, and then supplement it to 75%, just like they do for the UAW workers who are paid 70% (unemployment plus GM-paid supplement) through the Supplemental Unemployment Benefit provisions of their contract?
It looks like Obama is keeping the unemployment figures low and the unemployment funds healthier by burning through taxpayer’s bailout money at a faster rate, but perhaps there are legitimate legal reasons for doing it this way. Can you shed some light on this?
Posted by: Amelia
Hi Tom!
We usually try not to get into politics, but we will address this as an HR issue. Yes, there are several valid reasons why an employer would do this. For one thing, the employer’s future premiums for unemployment insurance are based on the number of people who collect unemployment and how much they collect. Suppose GM has 100 employees under this program. It may well be cheaper for the company to pay those workers 75% of salary for a few months. If they all collect unemployment, GMs unemployment premium will be higher for many years in the future. And it won’t be higher just for these 100 employees — it will be higher for every employee who works for GM.
So we see this as a basic cost-saving measure, not a nefarious plot. And we have to disagree — unemployment rates, particularly in Michigan, are not low. If you have questions on HR, we’ll be happy to address them. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Tom
Amelia,
Thanks for the reply. I didn’t mean to imply that I think unemployment is low in Michigan. In fact it is now the highest rate of all the states, well in excess of 10%, and getting plenty of attention in the media.
GM is doing this for thousands of salaried employees for weeks at a time, with no end in sight. The Michigan unemployment rate would be meaningfully higher if GM was not doing what it is doing, for whatever reason they are doing it.
Posted by: Amelia
Hi Tom! Yes, interesting point. Thanks for your observations! Amelia
Posted by: Denise
Amelia
If a exempt employee, who is paid on a yearly basis takes a few hours during the work day to attend to personal business, can those hours be deducted? Also if an employee is exempt is there a requirement to pay them for 86.7 hours per pay period vs 80 hours?
Denise
Posted by: Amelia
Hi Denise! If any exempt employee works any portion of the day, he or she must be paid for the entire work day. (Different rules apply to hourly employees and salaried non-exempt employees.) So if the exempt employee takes a few hours away from work to attend to personal business, he or she is entitled to payment for the entire day.
If the exempt employee takes the entire day away from work due to personal business, the employee is not entitled to payment for that day.
An employer can establish expectations for the number of hours that an exempt employee must work per week. If the exempt employee does not meet those expectations, he or she can be disciplined or terminated. But if the exempt employee works part of the day, the employee must be paid for the entire day.
We are not clear on the question regarding 86.7 hours. An exempt employee must be paid the same weekly salary, regardless of the quality or quantity of work. So an exempt employee who works 86.7 hours (or 200 hours for that matter) in a two-week pay period is entitled to the same salary as an exempt employee who works 80 hours. When an employee is exempt, the issue is “how many days did the employee work?” not “how many hours did the employee work?”
If we didn’t answer your question completely, feel free to post one that is more specific. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Matt
At my last job, I worked as a claims auditor for a large insurance company in Iowa. I was directed by my manager and other higher management personnel to complete insurance designation coursework, which consisted of courses on differing insurance topics. This was mandated in detail through my yearly performance expectations, for which I would get graded as an exceeds, meets, or does not meet. So, I took the classes and took enough classes to eventually earn an exceeds for the year on my performance evaluation. Keep in mind that prior to the claims auditor job and since leaving the company all together, but still working in insurance have I completed any insurance designation coursework. The courses were taken as a result of management’s mandate. Fast forward to me leaving the company, there is a company policy mandating that any educational expenses need to be repaid to the company if you leave within a year of completing the course. Now the company is seeking reimbursement for $3600.00.
Basically, I am disputing this claim, since I did not have a choice in the matter or whether or not to take coursework. Company management included this caveat on my performance evaluation and by failing to complete insurance designation coursework, I was putting my job in jeopardy. The coursework made up a good size percentage of my job performance. Even though this was mandated by the company, the company is now seeking reimbursement of the educational expenses. I have the performance evaluations and have tried to explain my situation to the employer, but it has fallen on deaf ears and they have taken it to collections.
I do not know what to do. I have taken steps to dispute the debt with the collections agency as I feel strongly about my position as I would not have taken this coursework, but for the management mandate. This is not an isolated situation; all members of the audit team were forced into this similar situation. While I was a salaried employee, would I have an argument of demanding overtime pay for the time spent on completing the coursework, because the time spent was substantial? I need any help you can spare. I would be willing to argue this in front of a small claims judge, but they turned it over to collections instead of just pursuing the small claims route. Thank you for your time and I appreciate your help.
Matt
Posted by: Amelia
Hi Matt! Unfortunately, many employers have the policy that certain educational expenses must be repaid if the employee leaves within the year, and those policies are generally legal. They do this to avoid paying for expensive courses and having the employee quit shortly thereafter. By accepting the money for the classes, and continuing to work for the employer, you were agreeing to their policies.
You did have a choice in this matter. You were aware of the policy, and presumably could have continued to work for the company for a year after you took the courses. (If you were involuntarily terminated through no fault of your own, that may be a different subject.) Or, you could have paid for the classes yourself.
Exempt salaried employees are never entitled to overtime, period.
Your best bet is to try to negotiate a settlement for a lower amount with the collections agency. The other alternative is simply to not pay it, and hope that this collections agency does not report to the national credit bureaus. It is unlikely that the collections agency will take you to court, and if they do, it is unlikely that you will win. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Barbara
I’m in California - we have salaried exempt employees and our company is considering shutting down for a week during Christmas. I understand the rules in that if the employee does no work for that week than they receive no pay - here’s this story. Payroll is from 12/16-12/31/09 (semi-monthly), during this particular pay period there is Fri 12/25 (Christmas) as per our employee handbook as a paid holiday. The company wants to shut it’s doors the week of 12/28-12/31/09. They will pay the employee for the Christmas hoilday but do not want to pay for the last 4 working days in Dec. By breaking up a pay period by shutting down do they break any rules of the employee pay when the employees are told/written that they will receive this much in salary per year and do the employees have to agree and can the employees if they choose use their vacation or PTO to get paid.
Posted by: Amelia
Hi Barbara! you are almost correct. When an employee does no work during a PAYROLL week, the exempt employee need not be paid for that week. Note that the regulations apply to a payroll WEEK, not a PAYPERIOD. In this case, it depends upon when the employer’s payroll week is. (Even employers who pay semi-monthly must have an established payroll week.) If the exempt employee does no work at all during the entire payroll week, he or she need not be paid. However, if the employee works even a few minutes during the week, the employee must be paid for the entire payroll week. By the same token, if Christmas Day was during one payroll week, and the other days were in a different payroll week, the employees would be entitled to full salary for both weeks.
So, yes, if the payroll week is divided, and the employee work part of the payroll week, the exempt employee must be paid for the entire payroll week.
However, in California or any state, the employer can dictate when the employee must use his or her vacation or PTO. So the employer must pay the employee, but could require that the employee use vacation for these days.
If all the time is in one payroll week, there is no law that they employer must allow the employee to use PTO or vacation during that period. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Barbara
Thank you so much. What happens to that week the employer shuts down 12/28-12/31 which is actually only Mon-Thurs and the FULL week includes Fri (1/1/2010) which is not only a paid holiday but a new year and the beginning of the new pay period, although not a new pay week? If the employer pays the employees for this holiday does it not show that one day was paid and since that happens the whole week must then be paid or does the employer choose not to pay the employees for that holiday (1/1/2010) as they have that right to pay for holidays or not and does the employer need to give notice to the employees that they are now NOT paying for this holiday and how much notice does the employer need to give employees when changing what’s stated in the official handbook?
Posted by: Amelia
Hi Barbara! In this case, the year, month and payperiod is irrelevant. Under federal law, all that matters is the payroll week. If the exempt employee does no work at all during the payroll week, there is no need for the exempt employee to be paid that week. If the exempt employee does any work at all during that week, the employee must be paid for the entire payroll week.
If we understand your question correctly, the exempt employee will be off Monday through Thursday. Then, Friday is a paid holiday and the employee will be off on Saturday and Sunday. Assuming that all this time is in the same PAYROLL WEEK, the exempt employee need not be paid.
Being paid for a holiday is not the same thing as working. Under federal law, if the exempt employee WORKS during that week, the employee must be paid for the week. But if one day is a paid holiday, there is no need for the employer to pay an exempt employee for the entire week. Even if the employer chose to pay the exempt employee for the holiday, they would not be obligated to pay the employee for the rest of the wek — because the employee did not work that week.
In almost every state, an employer can change policies with as little as one day’s notice. HTH, and thanks for reading the blogs!~ Amelia
Posted by: Patrick Lemmonds
Message
I am a full time non salaried employee working for a large company out of Georgia. I however live and work in Tennessee. The company I work for states that only salaried employees get sick pay, holiday pay, and vacation pay. Is this normal or legal?
Posted by: Amelia
Hi Partick! This is entirely legal, although it is unusual. There is no state or federal law that requires employers to give benefits like sick pay, holiday pay and vacation pay in Georgia, Tennessee or any other state (at this writing.) If an employer chooses to give those benefits, the employer determines the company policies affecting them. The employer can decide to offer those benefits only to salaried exempt employees and not to hourly employees. You can decide to look for a job with better benefits, when the economy picks up — and that is what we would recommend. HTH, and thanks for reading the blogs!~ Amelia