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Holiday Pay Practices: Do You Know Your Legal Requirements?

The end of the year is a good time to review your companys holiday pay practices.

by Mel Muskovitz
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The end of the year is a good time to review your company’s holiday pay practices.

Must an employer provide employees time off on holidays?

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No. There is no Federal law that requires an employer to provide time off, paid or otherwise, to employees on nationally recognized holidays.

Must an employer accommodate an employee’s observance of a religious holiday?

An employer is obligated to provide reasonable accommodation for the religious practices of its employees, unless it can show that the accommodation would result in undue hardship for its business. Many employers offer a “floating holiday” in addition to the regularly scheduled holidays. This allows an employee to take time off for religious observances that are not covered by the employer’s established holiday schedule.

Courts addressing the issue of religious accommodation generally agree that unpaid time off can be a reasonable accommodation, as can allowing an employee to use a vacation day to observe a religious holiday. Generally, employers require that floating holidays be taken in the same year they are granted and do not allow these days to be carried over into the next year. Employees usually are required to give adequate advance notice of their intention to take a floating holiday.

Must holiday time off be paid?

For non-exempt (hourly) employees, no. An employer does not have to pay hourly employees for time off on a holiday. An employer is only required to pay hourly employees for time actually worked. On the other hand, exempt employees (salaried employees who do not receive overtime), who are given the day off, must be paid their full weekly salary if they work any hours during the week in which the holiday falls. This requirement for exempt employees did not change under the new federal overtime regulations.

Must paid time off be counted as hours worked in determining whether an employee is entitled to overtime?

No. If an employer provides paid holidays, it does not have to count the paid hours as hours worked for purposes of determining whether an employee is entitled to overtime compensation. An employee must actually work 40 hours in a week before he/she is eligible for overtime. Paid time off (holidays, vacation, sick leave, etc.) is not considered time worked. Note, however, that many collective bargaining agreements include additional provisions for determining overtime.

May an employer attach conditions to the receipt of holiday pay?

Yes. For example, an employer may require that employees work or be on an approved leave status the day before and after a holiday in order to receive holiday pay. An employer may also require an employee to have worked for the company for a specified period of time before being eligible for holiday pay. In addition, an employer may pro-rate the amount of holiday pay due to a part-time employee. Whatever conditions apply to the receipt of holiday pay should be in writing.

Are employees who work a holiday entitled to premium pay?

No. While it is common to pay a premium to an employee who works on a holiday, there is no legal requirement to do so.

Must an employer provide the same holiday benefits to all employees?

No, as long as the basis for the different treatment is not discriminatory, i.e., based on a protected classification, such as age, race, etc. For instance, an employer can provide holiday pay only to full time and not part time employees, or to office and not “field” employees.

What if a holiday falls on an employee’s day off or when the business is closed?

While not required by law, many employers give an employee the option of taking off another day if a holiday falls on the employee’s day off. Similarly, many employers observe a holiday on the preceding Friday or the following Monday if a holiday falls on a Saturday or Sunday and the employer is not open for business on the weekend.

What if an employee works a compressed work week (i.e. four 10-hour days per week)?

As with employees who work a standard work week, there is no requirement that an employer provide an employee on a compressed work week schedule with paid or unpaid time off on a holiday. Employers who utilize a compressed work week have generally taken one of three approaches to eligibility for holiday pay.

  • Some employers pay only for holidays occurring on the employee’s regularly scheduled work day.
  • On the other hand, some employers allow the employee to take a “substitute” holiday on a day when he or she would otherwise have been required to work, if the holiday falls on a day the employee is not scheduled to work.
  • Finally, other employers prefer to have employees who work a compressed work week on the job at least four days a week and pay for the holiday even if the employee is not scheduled to work that day, thus giving the employees an extra day of pay.

As long as the employer follows its policy consistently, any approach selected by an employer is acceptable.