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Salary Deduction for Exempt Employee for Holiday

If a salaried employee has a holiday during the 90 day probation period is the employer required to pay the employee for holiday pay? If so where can this law be found?

The federal Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments.

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

Non-exempt employees must be paid for all hours worked and are subject to overtime and minimum wage requirements prescribed by the FLSA.

Conversely, exempt employees receive a fixed predetermined salary for any week during which work is performed regardless of the quantity or quality of such work.

Many companies have policies that impose restrictions on paid time off benefits such as holiday pay during employees’ probation periods.

Since non-exempt employees are only required to be paid for time actually worked, not paying holiday pay to a non-exempt employee who is not eligible for it is permitted. Of course, assuming doing so is allowable under any applicable employment contract or collective bargaining agreement.

The case is not the same for exempt employees. Even if an exempt employee isn’t eligible for holiday pay under the company policy, deducting the day from the employee’s salary is not permitted. Deductions from exempt employees’ salaries are permitted only in limited circumstances including:

Further, one of the criteria to qualify for exempt status under the FLSA is that the employee be paid on a salary basis. Per the FLSA, “An employee is not paid on a salary basis if deductions from the employee’s predetermined compensation are made for absences occasioned by the employer or by the operating requirements of the business.” Closing the business for a holiday is an absence occasioned by the employer.

So, making a deduction from an exempt employee’s salary for a holiday when the company is closed would violate the FLSA.

This entry was posted on Sunday, December 11th, 2016 at 2:32 pm and is filed under
Benefits, Compensation.
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