From the Hotline: Holiday Pay During Vacation or Leave

Question: If a holiday falls during the week of an employee’s leave (either vacation or unpaid leave of absence), how does a company pay salaried (exempt) and hourly (nonexempt) employees that week? Does a part-time employee get paid for a holiday?

Answer: The answers to your questions are ultimately determined by company policy due to the fact that there is no mandatory requirement under state or federal laws to offer employees holiday pay. Many employers do, however, offer holiday pay to both full-time and part-time employees as part of the company’s competitive total compensation package.

It is a matter of company policy regarding pay for a holiday that falls within the week of an employee’s vacation. You may define eligibility criteria for these benefits, such as requiring that employees work the day before and the day after the holiday to receive the benefit unless on approved time off, or holiday pay will only be provided when the holiday falls on a regularly-scheduled work day.

For nonexempt hourly employees: If your company does not offer holiday pay and your business is closed for the holiday, you would not be required to pay nonexempt hourly employees for that day. Under the federal Fair Labor Standards Act (FLSA), these employees are paid on an “hours worked” basis. Employees could request that available accrued paid time off be substituted for that day in order to be paid.

For exempt employees: Under the FLSA, exempt employees are paid on a “salary basis.” Employers may not make deductions from an exempt employee’s pay for absences caused by the employer or by the operating requirements of the business during the workweek, such as the business being closed for a holiday. If the employer has a policy that employees have to be at work either the day before or the day after the holiday in order for the holiday to be paid, the employer could deduct from the exempt employee’s accrued paid time off bank for the absence on the holiday. If exempt employees have no accrued paid time off benefits available, the holiday would still be paid by the employer as part of the salary basis requirement, and the paid time off bank hours would be in the negative until additional time off is accrued. For more information about the FLSA rules, click here.

Nothing under the federal or state family and medical leave laws (FMLA or state “mini-FMLA”) require an employer to continue a holiday pay benefit during an unpaid leave for either hourly nonexempt or exempt employees. For exempt employees on FMLA, the “salary basis” test is suspended during periods of unpaid leave.