Benefits and Compensation, HR Management & Compliance

Ask the Expert: Holiday Pay for Probationary Employees?

Question: Our company has a probationary period of 90 days for all new hires (both exempt and non-exempt) that does not allow holiday pay until after the probationary period is met. I read under DOL that FLSA does not require private employers to provide holiday pay. Are we violating any rules?

holiday pay

Answer:  Thank you for your inquiry regarding the legality of a 90-day probationary period before employees – both exempt and non-exempt – are eligible to be paid for holidays.

You are correct that the federal FLSA does not require private employers to compensate non-exempt workers for holidays that are not worked. The FLSA also does not require private employers to provide extra or premium compensation to employees who do work on holidays (unless, of course, those holiday hours would otherwise entitle a non-exempt employee to overtime).

However, your policy may run into problems if you are deducting from or reducing the standard salary of an exempt employee because he or she did not work on a holiday.

Note that most (not all, but most) exemptions under the FLSA require payment on a salaried basis in order to qualify for the exemption. This means that the employee must regularly receive the same amount of pay for each pay period, regardless of the quantity or quality of work performed.

If the company is closed (or otherwise business is not conducted) due to a holiday, then the exempt employee’s salary for that week cannot be reduced for that day. (Again, non-exempt workers need not be paid for these days).

There are limited situations under which an exempt employee’s pay can be reduced for missed work without affecting their payment on a salaried basis. For example, if the employee performs no work for an entire workweek, the employee misses one or more full days for personal reasons other than illness or accident, or the employee took unpaid leave under the Family and Medical Leave Act. Therefore, if the business is closed for an entire week or if the business is open during the holiday, yet the exempt employee misses the full day for personal reasons, then a deduction may be permissible.

Otherwise, simply deducting a single day of “holiday pay” from an exempt employee’s salary—regardless of how long the employee has worked for the company—is not permissible and could result in loss of the worker’s exempt status.

Note, though, that this requirement isn’t specifically a “holiday pay” requirement, so much as it is a requirement that exempt employees be paid on a salaried basis. Thus, as long as your exempt employees receive their standard salary for each week during which work is performed, then the FLSA imposes no additional requirements (on exempt or non-exempt workers) for holiday pay or time off.

To the extent that employers are required to provide special or premium compensation to employees (exempt or non-exempt) for holiday time, these matters are governed by state—rather than federal—law.

You have indicated that your company is in Louisiana. Louisiana does not require private sector employers to provide employees with holiday or vacation pay. Louisiana employers are free to devise their own system for vacation accrual and holiday pay, including a probationary period such as the one you have (again, as long as your exempt workers are paid appropriately).

The most important aspect of such policies is simply that they be administered consistently and fairly. Thus, as long as the policy is applied fairly to all similarly situated employees (whether exempt or non-exempt) and the policy does not appear to discriminate against any protected class, then it is likely to be compliant with state and federal wage and antidiscrimination laws.