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Scheduling, seniority issues, and holiday pay

by Jennifer L. Anderson

Ebenezer Scrooge is the most infamous of employers — overworking and underpaying his employees, denying their vacation requests, and spreading holiday misery rather than holiday cheer. Fortunately, A Christmas Carol is fiction, and times have changed. These days, most of you decorate your offices, accommodate employees’ vacation requests, provide standard holidays off with pay, or pay holiday bonuses. But beware — what you think is a nice gesture during the holidays may come back to haunt you. It only takes one Scrooge to ruin an otherwise enjoyable time of year.

That isn’t to say you shouldn’t allow office decorations, holiday pay, or bonuses. Those gestures can be good for employee morale. But avoid a visit from the ghost of holiday litigation by reviewing the tips we’re offering this month in response to your questions.

Holiday pay policy

Q: Is it still acceptable to have a policy requiring employees to work their scheduled hours the day before and after a holiday to be eligible for holiday pay—or did I miss the memo saying that policy is no longer legal?

A: No, you didn’t miss the memo. Federal law doesn’t require you to offer paid holidays off or extra pay for working holidays (a nonovertime holiday premium). So it’s perfectly fine to impose a requirement that employees work the day before and after a holiday to be eligible for holiday pay when they don’t work or a special premium for working regular hours on a holiday.

You should be careful about the amount you pay your employees for working on a holiday, however, because it could increase their regular rate of pay — and therefore their overtime rate. If you pay a premium rate for working holidays, you don’t need to include it when calculating an employee’s regular rate for overtime purposes if the premium rate is at least time and a half the regular rate. A premium rate of pay for working holidays that’s less than time and a half the employee’s regular rate must be included in calculating his regular rate for overtime purposes.

Let’s try an example. If your employee’s ordinary rate of pay is $10 an hour and you offer him a premium rate of at least $15 an hour for working nonovertime hours on holidays, you don’t have to include that additional amount when you’re calculating his regular (and overtime) rate for that week. But if you pay him a premium rate of $12 an hour for working nonovertime hours on a holiday, you must include that in his regular rate, which will increase his overtime rate for that week. If you pay your employees for a holiday and give them the holiday off (i.e., they don’t work), however, you don’t have to include that pay in the regular rate calculation, regardless of the amount.

Wage and Hour Compliance Manual

Christmas bonuses for nonexempt employees

Q: We pay our employees a Christmas bonus based on the number of years they have worked for the company. Does it have to be included when we calculate hours worked for nonexempt employees?

A: No. But be careful. A bonus may either be considered (1) compensation for services or performance or (2) a gift. The difference is important because bonuses that are compensation must be included in the regular rate of pay for overtime purposes. If the bonus is paid as part of an employment contract, agreement, or policy or if it’s so large or connected to compensation that employees are led to believe it’s a part of the wages they work for, it may be considered compensation, not a gift.

Money paid as a gift on a special occasion, on the other hand, doesn’t have to be included when calculating an employee’s regular rate of pay if it isn’t based on production, efficiency, or hours worked. But even though you don’t have to include it in the regular rate calculation, you can’t credit the bonus toward any overtime compensation you owe an employee.

In your case, the holiday bonus still may be considered a gift because it’s based on the number of years an employee has worked for you. The U.S. Department of Labor has said that a Christmas bonus given as a gift doesn’t have to be included when calculating an employee’s regular rate of pay even if it’s paid regularly and employees expect it and even if the amounts paid to employees are different based on salary, hourly rates, or length of service. Again, the bonus is a gift unless it’s based on production, efficiency, or hours worked.

FLSA: Wage and Hour Self-Audit Guide

Seniority requirements for holiday pay

Q: Our current policy states that all employees must meet a 90-day seniority requirement before they can use holiday pay. I think I read somewhere that exempt employees can’t be forced to meet eligibility requirements for holiday pay because that could mean they don’t receive a full week’s salary. Is that correct?

A: Holiday pay policies usually come in two forms: (1) Employees are allowed the day off and paid their full day’s salary or the equivalent of eight hours worked, or (2) an employee works on the holiday and receives a premium, like double pay. Keep in mind that holiday pay is gratuitous. That is, it isn’t required by federal law (you should also check for state-specific laws).

Exempt employees must receive their full salaries for the weeks they work, regardless of how many days or how many hours they actually work. Certain deductions are permissible, however, even for exempt employees. For instance, it’s OK to make deductions from an exempt employee’s salary when he takes one or more full days off for personal reasons not related to sickness or disability. In addition, the federal Family and Medical Leave Act (FMLA) doesn’t require you to pay exempt employees who are out for FMLA-covered reasons. Aside from those and a few other exceptions, an exempt employee must be paid his full salary for any week he works.

With those rules in mind, a 90-day seniority requirement before an exempt employee is eligible for holiday pay is impermissible if you dock him (i.e., if you reduce his expected salary because of the holiday). If your holiday pay policy is to give employees some extra premium above their expected wage, however, you don’t have to make the extra payment available to exempt employees during the 90-day ineligibility period. You just can’t reduce an exempt employee’s salary below his expected wage. That isn’t one of the deductions permitted by the Fair Labor Standards Act, and by doing it, you risk losing his exemption

Jennifer Anderson is a partner with Jones Walker in the firm’s Baton Rouge, Louisiana, office. She is a member of the Employers Counsel Network and an editor for Louisiana Employment Law Letter. She may be contacted at

1 thought on “Scheduling, seniority issues, and holiday pay”

  1. Regarding the first question, am I correct in stating that this would not apply to an exempt employee? The employer could not make the deduction from the exempt employee’s pay for the holiday if the exempt employee did not work the day before and/or after the holiday.

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