Holiday Shutdowns and Exempt Employees

With the current economic crisis, many employers are considering giving workers additional unpaid time off during the holidays. This includes giving workers Friday, November 28 (the day after Thanksgiving) and/or Friday, December 26 (the day after Christmas) off without pay.

Other employers are considering closing for an entire week between Christmas and New Years.

However, these tactics raise issues around the payment of exempt salaried employees that every employer needs to be aware of.

Hourly employees, of course, need not be paid during these holiday closures. Non-exempt salaried employees also need not be paid for this time. However, the regulations regarding paying salaried exempt employees are more complex.

In many cases exempt employees must be paid for such closures, according to Angela Stone of the SHRM, “If an exempt employee works any portion of a workweek, he or she must be paid for days in which they are ready, willing and able to work.” Stone adds that a deduction cannot be made for time when no work is available.

The Society of Human Resource Management or SHRM is headquartered in Alexandria, Virginia.   

Under federal regulations, docking the salaried exempt employee’s pay for such a temporary layoff may change the employee’s status from exempt to non-exempt. This would effectively make the employee eligible for overtime pay for the past, as well as the future.

An exempt employee need not be paid for any payroll week in which he or she performs no work at all. If the company is shuttered for an entire payroll week, and the exempt employee performs no work at all during that period, then he or she can legitimately be unpaid during that period. However, if the exempt employee spends even one hour (or a portion of an hour) working during that payroll period, he or she must be paid their entire salary for the week.

Employers can, of course, dock an exempt employees salary if the employee misses work for one or more days due to illness or to attend to personal business. This is an entirely separate situation from a holiday closure or temporary shutdown of the business by the employer.  

In many cases, employees who have vacation or personal time can be required to use it for holiday closures, providing the employees have adequate notice. However, this varies by state.  (And, of course, paying an employee for vacation time instead of salary doesn’t save the company any money.)

In California, for example, the regulations regarding holiday shutdowns require that employers let workers know at least 90 days in advance, that they will be required to use vacation or personal time for such closures.