HR Management & Compliance

Holiday Pay, Part 1: Must You Pay Two Premium Pay Rates for Working on a Holiday if Employee Puts in OT on that Day?






Suppose, like many employers, you have a policy granting employees
a premium rate if they have to work on certain holidays. If an employee then
works on a holiday, and those hours put the employee into overtime for the day
or week, do you have to pay an overtime premium on top of the holiday premium?

 

Fortunately, the answer is no, according to a California appeals court. We’ll explain what
happened. And, in next month’s issue, we’ll give you a sample holiday pay
policy.

 

Employee Works on Holiday

Ester Roman was a security guard for Advanced-Tech Security
Services, Inc. The firm’s employee handbook specified that for overtime hours,
employees would be paid 1½ times their regular pay rate. The handbook also
explained that employees required to work on certain holidays—New Year’s Day,
Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas—would be
paid a premium rate of time and a half for each hour that day.

 

During Labor Day week in 2006, Roman worked 12 hours on Labor Day,
12 hours each on Tuesday and Thursday, and eight hours a day on Thursday,
Friday, and Saturday—a total of 60 hours for the week. Her paycheck included
overtime premium pay for the combined eight hours of overtime she worked on Tuesday/Thursday,
plus premium pay for the 12 hours she worked on Labor Day. Thus, she received
regular pay for 40 hours and premium pay (at 1½ times her regular rate) for 20
hours.

 

Lawsuit Contends Employees Underpaid for Overtime

Roman filed a class action lawsuit, claiming that Advanced-Tech
violated California Labor Code overtime provisions by underpaying employees who
worked on holidays. She claimed that the premium rate she received for working
on Labor Day was really her “regular rate of pay” under the holiday pay policy’s
terms and, therefore, she was entitled to additional overtime payments for her
work that day because she put in more than 40 hours that week.

Advanced-Tech asked the court to dismiss the case. It argued that
Roman was paid time and a half for her holiday work and that her holiday pay
was properly credited against overtime pay to the extent she worked more than
40 hours in the workweek.

 

Employer Can Credit Holiday Pay
Toward Overtime Pay

The appeals court sided with Advanced-Tech and threw out the case.1

 

The court explained that the California Labor Code requires
employers to pay employees a premium rate of 1½ times their regular pay rate
for work in excess of eight hours in a day or 40 in a week. The law also states
that employers do not have to pay more than one overtime rate to calculate the
amount to be paid to an employee for any hour of overtime work. What’s more,
said the court, nothing in the Labor Code prohibits an employer from crediting
premium pay for a holiday against weekly overtime. In compliance with the Labor
Code, the court concluded, Roman was indeed paid 1½ times her regular rate for
each hour she worked over eight in a day and 40 in a week, including during
weeks she worked on a holiday.

 


Roman was not entitled to be paid time and a half on top of the time and a half she already received for her holiday work


 

Advanced-Tech’s pay practices also complied with the federal Fair
Labor Standards Act (FLSA), which requires time and a half, based on an
employee’s regular rate, for hours over 40 in a workweek. The FLSA exempts
certain kinds of remuneration from the regular rate, such as extra compensation
(at least time and a half) provided by a premium rate for work by the employee
on Saturdays, Sundays,
holidays,
or regular days of rest, or on the sixth or seventh
day of the workweek.

 

The court further noted that U.S. Department of Labor regulations
under the FLSA state that time and a half holiday pay may be treated as
overtime pay. Thus, Roman was not entitled to be paid time and a half on top of
the time and a half she already received for her holiday work.

 

Steps to Take

In light of this decision, it is wise to review your pay policies
and practices to ensure that you properly
calculate overtime premium pay
when employees work overtime during a week in which they also work on a paid
holiday. If you already pay a premium of at least time and a half for the
holiday work, this case makes it clear that you don’t have to pay an additional
premium if those hours also constitute overtime.

 

Note, too, that the law does not require employers to pay a
premium for hours worked on a holiday. However, if your policies provide for
holiday premium pay, you are probably contractually bound to stick to your
promise. What’s more, it’s important that your policies make it clear that
employees won’t receive additional overtime premium pay for hours already paid
at a holiday premium rate. Next month, in Part 2 of this article, we’ll provide
you with a sample holiday pay policy.

 


1 Advanced-Tech Security Services, Inc. v. Superior Court (Roman),
Calif. Court of Appeals (Dist. 2) No. B205186, 2008