Heard on the Hotline: Holiday Pay

Q: We have a manager who just started work for us last week. Our policy says an individual has to be employed for 90 days before we pay for a holiday. Is our policy OK or do we have to pay him?

A: While your policy is acceptable for your non-exempt employees, it violates the Fair Labor Standards Act (FLSA) with respect to your exempt employees. The FLSA limits under what circumstances an exempt employee’s pay can be docked. If the business closure is “occasioned by the employer” for such things as holidays, emergency closings, etc., the exempt employee must be paid his full salary. Download the fact sheet and text of the law for more information.

29 CFR 541.602 – Salary basis.  “An employee is not paid on a salary basis if deductions from the employee’s predetermined compensation are made for absences occasioned by the employer or by the operating requirements of the business. If the employee is ready, willing and able to work, deductions may not be made for time when work is not available.”

There are limited scenarios where we can deduct from exempt employee pay – we are not allowed to deduct pay for holiday shutdown, emergency weather shutdown, or other occasional business closures.

Don’ forget! Deductions from exempt employee pay are allowed:
  • When an employee is absent from work for one or more full days for personal reasons other than sickness or disability;
  • For absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness; (before the employee has qualified for the plan, policy or practice or after the employee has exhausted the leave allowance under the plan.)
  • To offset amounts employees receive as jury or witness fees, or for temporary military duty pay;
  • For penalties imposed in good faith for infractions of safety rules of major significance;
  • For unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions;
  • In the employee’s initial or terminal week of employment if the employee does not work the full week, or
  • For unpaid leave taken by the employee under the federal Family and Medical Leave Act.

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