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THIS WEEK'S E-TIP: Exempt Employees and Unpaid Holidays Q&A
Published by Personnel Policy Service, Inc.
"Your Policy and Compliance Experts Since 1972"
THIS WEEK'S E-TIP: Exempt Employees and Unpaid Holidays Q&A

If you close your operations for holidays and do not pay exempt
employees, you could be facing a FLSA violation. Find out what the
FLSA requires you to do.
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THIS WEEK'S E-TIP: Exempt Employees and Unpaid Holidays Q&A

Q: We closed our offices both Thanksgiving Day and the Friday
after, but gave employees a paid holiday only for Thanksgiving. We
know that nonexempt employees do not have to be paid for that Friday,
but what about exempt employees?

A: You should pay your exempt employees for that day. If you do not,
you may jeopardize their exempt status. (Employees who are
nonexempt under the Fair Labor Standards Act (FLSA) do not have to be
paid for the day since they only must be paid for time that they actually

According to the FLSA, "exempt" employees generally must be paid a
regular salary, regardless of the number of hours they work or the
quantity or quality of their work. Thus, they typically should receive their
full pay for any week that they perform some work, although there are a
few exceptions for certain full-day absences, described below.

(As a reminder, the Department of Labor regulations implementing the
FLSA provide that the following categories of employees are exempt
from the overtime and minimum wage requirements of the FLSA: (1)
bona fide administrative, executive, or professional employees; (2)
workers employed in outside sales; (3) highly skilled computer-related
employees; and (4) certain "highly-compensated" employees.)

Although the Department of Labor's (DOL) regulations implementing the
FLSA do not specifically address unpaid holidays, they do provide that
an employee will not be considered paid "on a salary basis" if deductions
are made "for absences occasioned by the employer or by the operating
requirements of the business."

Unpaid holidays generally are considered the type of absence
"occasioned by the employer." According to a DOL Wage & Hour
Opinion Letter dated 5/27/99, the DOL indicated that an employee will
not be considered to be paid on a salary basis if deductions from the
employee's predetermined compensation are made for absences
occasioned by the employer, such as being closed on certain holidays,
or the operating requirements of the business.
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Further, the regulations recognize only a limited number of instances
when an employer may make deductions (or "dock") for absences of a
full day or more without jeopardizing the exemption and thus incurring
overtime liability. But, holidays do not fall under any of those exceptions.

For example, an employer may make deductions for an exempt
employee's absence for a day or more for personal reasons other than
sickness or accident. In addition, deductions may be made for absences
of a day or more because of illness or injury if the employer has a bona
fide plan, policy, or practice that provides compensation for loss of salary
due to sickness or disability (such as a policy that allows employees to
accrue paid sick leave).

The DOL regulations also make it clear that employers cannot dock
exempt employees for half-day holidays. Specifically, the regulations
prohibit employers from making deductions from an exempt employee's
pay for absences of less than a day, without exception.

So, to maintain your exempt employees' status, you should pay them for
any holiday when your business is closed.
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Subscribers to the Personnel Policy Manual and HR Policy Answers on
CD can find more information on exempt employees and holiday pay in
, Chapter 503, note 11.

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Information provided in HR Matters E-Tips is researched and reviewed
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