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Waiting Period for Holiday Pay Eligibility

My California employer has a policy that new employees are eligible for holiday pay only after completing the initial 90 day orientation period. This policy applies to both exempt and nonexempt employees. Is the use of said policy legal when it comes to exempt employees? Are exempt employees protected from such policies? Are we required to pay exempt employees when the company closes for a holiday regardless of their time on the job?

California employers are not required to provide its employees with paid holidays. However, employers must ensure compensation regulations set forth under the federal Fair Labor Standards Act (FLSA) are followed.

Under the FLSA, employees are classified as either non-exempt or exempt.

Non-exempt means that an employee is subject to the overtime and minimum wage requirements prescribed by the FLSA. Conversely, exempt employees are excluded from such provisions.

Non-exempt employees are paid for each and every hour worked and need not be paid for time not actually worked. Thus, a policy prohibiting non-exempt employees from holiday pay until the completion of a probationary period is lawful.

Exempt employees receive a fixed, predetermined salary for any workweek during which work is performed regardless of the quantity or quality of work performed.

There are limited permissible deductions from an exempt employee’s salary. Feel free to review our previous posts for more information on allowable deductions.

The FLSA regulations don’t specifically allow deductions for holidays. Furthermore, deductions from an exempt employee’s salary for absences occasioned by the employer violate the salary basis test for exempt status. An employer closing the business to recognize a holiday would be an absence “occasioned by the employer.” Also, an exempt employee’s salary cannot be reduced if the employee is ready, willing, and able to work, but work was not available such as the company being closed for a holiday. Thus, a policy prohibiting exempt employees from receiving holiday pay until the completion of a probationary period is not advisable since it would jeopardize the exempt status of employees.

Employers are permitted to require employees, both non-exempt and exempt, to use their PTO accruals for business closures. Depending upon the policy for such accruals during the probationary period, this may not be possible.

As previously stated, non-exempt employees need not be paid for time not actually worked. So, a non-exempt employee who has exhausted their PTO bank is simply not paid for the remaining hours.

However, if an exempt employee has exhausted their PTO bank, they must still receive their full salary for the workweek assuming they performed at least some work during that workweek.


This entry was posted on Tuesday, January 12th, 2016 at 8:19 pm and is filed under
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