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How to stay off the DOL’s naughty list during the holiday season

by Julie A. Moore

Even without the eggnog fog and the distracting visions of sugar plums dancing through everyone’s heads at this time of year, the holidays can be a tricky time for complying with employment laws related to wage and hour and leave issues. Here are some FAQs we typically see from HR professionals each year during the holidays. 

Fa-la-la-la-FLSA and the holidays
Q Are employers required to give employees the day off on a holiday?

A Neither the Fair Labor Standards Act (FLSA) nor most state laws require private-sector employers to give employees the day off on a holiday. Because holiday closings are a discretionary benefit, you may require employees to work on a holiday, although you may be referred to as a “scrooge” by the employees who are required work.

Q If employees are required to work on a holiday, are they entitled to extra pay?

A The FLSA doesn’t require private-sector employers to pay employees premium or incentive pay for working on a holiday, although some employers opt to do so as a way to boost morale or entice employees to volunteer for holiday shifts. Under the law, holidays are considered regular workdays, and employees who are required to work on a holiday are entitled to receive only their normal pay for the time worked. Because holiday incentive pay is generally considered a fringe benefit, it’s a matter of agreement between an employer and an employee (or the employee’s representative).

Q If our business is closed for a holiday, are employees still entitled to be paid?

A In general, state and federal law requires employers to pay employees only for time worked. You are not required to pay nonexempt employees for holidays they don’t actually work. As a result, if a nonexempt employee doesn’t work on Christmas Day and New Year’s Day, he isn’t entitled to pay for either of those days. (Of course, you are free to provide paid holidays off to all employees as a fringe benefit.)

The rule is different for exempt salaried employees. Exempt employees must be paid for all holidays even if they aren’t required to work. The FLSA doesn’t permit you to dock the salary of exempt employees for holidays; doing so will jeopardize their exempt status. Even if an exempt employee doesn’t work on Christmas Day and New Year’s Day, she must be paid her entire salary for those workweeks.

Q If we opt to pay employees for holidays that they don’t actually work as a fringe benefit, how does that affect overtime?

A Federal and West Virginia law requires employers to pay nonexempt employees 1½ times their regular rate of pay for each hour worked over 40 in a workweek. Paid time off (PTO) isn’t considered time worked. If you provide paid holidays off to nonexempt employees, you don’t have to count the paid holiday hours as hours worked for purposes of determining whether an employee is entitled to overtime compensation. A nonexempt employee must actually work 40 hours in a week before he is eligible for overtime.

Suppose an employee works 40 hours in a workweek and gets an additional eight hours of holiday pay for New Year’s Day, even though he didn’t actually work that day. The employee is entitled to 48 hours of straight pay at his regular hourly rate (40 hours + eight hours for the holiday). He isn’t entitled to 40 hours of straight pay and eight hours at time and a half because the eight hours of holiday pay on New Year’s Day don’t count as time worked.

Similarly, suppose an employee works 42 hours in a workweek and gets an additional eight hours of holiday pay for Christmas Day, even though she didn’t actually work on Christmas Day. In this example, the employee is entitled to 48 hours of straight pay at her regular hourly rate (40 hours + eight hours for the holiday) plus two hours of overtime pay, not 40 hours of straight pay and 10 hours at time and a half. Again, the eight hours of holiday pay on Christmas Day don’t count as time worked for purposes of calculating overtime.

Ho-ho-holidays and the FMLA
Q Does a holiday count against an employee’s 12-week leave entitlement under the Family and Medical Leave Act (FMLA)?

A The answer to this question is found in the FMLA regulations, which provide:

For purposes of determining the amount of leave used by an employee, the fact that a holiday may occur within the week taken as FMLA leave has no effect; the week is counted as a week of FMLA leave. However, if an employee is using FMLA leave in increments of less than one week, the holiday will not count against the employee’s FMLA entitlement unless the employee was otherwise scheduled and expected to work during the holiday.

A few examples are helpful to clarify this provision. This year, Christmas Day falls on a Friday. If one of your employees is out on FMLA leave for the entire week of Christmas (i.e., Monday, December 21, through Friday, December 25), the day of missed work on the holiday counts against her FMLA leave entitlement —even if your business is closed on Christmas Day. However, if the employee works on Monday and Tuesday and is out on FMLA leave only from Wednesday through Friday, the holiday will not count against her FMLA leave entitlement (unless you are open for business and the employee was scheduled to work).

Q What if our business is closed for the entire weeks of Christmas and New Year’s?

A Are you hiring? (I’m not kidding.) In all seriousness, the answer to this question is also addressed in the FMLA regulations. If a company has an extended shutdown during which employees are not expected to report for work for one or more full workweeks (e.g., a plant closing for maintenance), the shutdown period cannot count against an employee’s FMLA allotment.

Q Are we required to pay employees for holidays that occur during FMLA leave?

A Under the FMLA regulations, “An employee’s entitlement to benefits other than group health benefits during a period of FMLA leave (e.g., holiday pay) is to be determined by the employer’s established policy for providing such benefits when the employee is on other forms of leave (paid or unpaid, as appropriate).” The key here is treating employees on FMLA leave consistently with the way you treat employees on non-FMLA leave under your personnel policies.

If employees on unpaid personal leave aren’t entitled to holiday pay if a paid holiday is observed during their leave, then employees on unpaid FMLA leave are likewise not entitled to holiday pay. If an employee’s FMLA leave is being taken in conjunction with paid leave, then refer to your policies that govern how you treat employees on paid leave. If employees are entitled to receive holiday pay while they are on paid leave (e.g., vacation or other PTO), then an employee who is using his accrued paid leave concurrently with FMLA leave is entitled to holiday pay for any paid holiday that is observed during his FMLA leave.

The U.S. Department of Labor (DOL) has clarified that if an employee is entitled to holiday pay while he is substituting paid leave for unpaid leave, the fact that he received pay for one or more holidays during his FMLA leave doesn’t extend his FMLA leave entitlement. For example, if an employee receives holiday pay for Christmas Day, he isn’t entitled to 12 weeks and one day of FMLA leave. The entitlement is still just 12 weeks.

Bottom line
Administering the FLSA and the FMLA during the holiday season can be challenging. We hope these FAQs help our loyal readers navigate through the holiday http://www.steptoe-johnson.com/sites/default/files/styles/profile_picture/public/julie%5Bdot%5Darbore%5Bat%5Dsteptoeandjohnson%5Bdot%5Dcom.jpg?itok=LoHOf_D6season without getting a lump of coal in their stockings —or, more important, a knock on the door from the DOL.

Julie A. Moore is an attorney with Steptoe & Johnson PLLC, practicing in the firm’s  Morgantown, West Virginia, office. She may be contacted at julie.moore@steptoe-johnson.com.