Published Date: 11/10/2014
By Pat Rountree
As the clock spins around and the days fly by toward Thanksgiving and Christmas holidays, some employers are considering closing extra days not covered by the company-paid holidays. Since those extra days are not company-paid holidays, there are questions about pay for those days.
Employees (both hourly and salaried) may be required to use vacation or PTO to cover these extra days. But what if they don’t have any left? Hourly employees only have to be paid for hours actually worked. However, for salaried exempt employees, this would violate the salary basis requirement unless the employees don’t work any part of the week.
One of the stipulations of salary basis is that:
If the employer makes deductions from an employee’s predetermined salary, i.e., because of the operating requirements of the business, that employee is not paid on a “salary basis.” If the employee is ready, willing and able to work, deductions may not be made for time when work is not available.
Consequently, if the holiday and shutdown period would not be for an entire week, exempt employees must still be paid their guaranteed salary if they don’t have vacation/PTO to take for shutdown days.
The Department of Labor has taken the position that where an employer has a benefits plan (e.g., vacation time, sick leave), it is permissible to substitute or reduce the accrued leave in the plan for the time an employee is absent from work, whether the absence is a partial day or a full day, without affecting the salary basis of payment, if the employee nevertheless receives in payment his or her guaranteed salary.
You may also encounter employee relations issues if you don’t announce the shutdown in time for employees to save vacation. For hourly employees, they may enjoy the extra time off, but the time will be unpaid. For exempt employees, some may have vacation/PTO remaining and others not. For those who have to take a day of their paid leave for the shutdown, they may feel it is unfair that others who don’t have any paid leave will get paid anyway.
Communication and employee relations considerations are important even when your practices are compliant. When possible, it would be advisable to let employees know early in the year if you will shut down and require them to use paid time off for those days; then they can save time, and the manager can manage the time they use to reserve that time.
If it is a last minute decision (slow work or you just want to provide extra time off), you can communicate the good news that employees will have extra time off to rest and enjoy the holidays. Then you must decide your position on the exempt pay issue if employees don’t have paid time left.
For more information on salary basis and allowable deductions, see http://j.mp/17-G.
If you have additional questions, please call CAI's Advice & Resolution Team at 919‑878‑9222 or 336‑668‑7746.