With the summer holidays approaching, employers may have questions about providing time off to employees and the pay requirements for employees who do work on Memorial Day, Juneteenth, Independence Day, and/or Labor Day. To help you understand the rules, here are answers to frequently asked questions about the holidays.
Q: Do I have to offer Memorial Day, Juneteenth, Independence Day, and Labor Day as paid time off?
A: Unless a contract, agreement, or policy says otherwise, private employers are generally not required to provide paid time off to non-exempt employees (those entitled to minimum wage and overtime) when they don't work on a holiday,* including Memorial Day, Juneteenth, Independence Day, and Labor Day. However, if your company closes for these holidays, employees classified as exempt from overtime (those who meet specific salary and duties requirements) must generally still receive their full pay, as long as they work any part of the workweek.
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* Note: Under federal and many state laws, employers are generally required to provide reasonable accommodations for employees' sincerely held religious beliefs and practices, unless doing so would impose substantial increased costs in relation to the operations of the particular business. This may include providing time off for religious observances. |
Q: If my company offers paid holidays to non-exempt employees, must I observe Memorial Day, Juneteenth, Independence Day, or Labor Day as one of them?
A: Employers may generally choose whether to observe Memorial Day, Juneteenth, Independence Day, and/or Labor Day as paid holidays. While some states have laws that restrict certain types of businesses from opening on holidays, these laws don't require employees to be paid for this time off. That said, these holidays are generally some of the most common paid holidays and are important to many applicants and employees.
Q: Can I require employees to work on Memorial Day, Juneteenth, Independence Day, and/or Labor Day?
A: Check your state law, which may have restrictions. For example, Massachusetts and Rhode Island prohibit certain employers from requiring employees to work on Memorial Day, Juneteenth, Independence Day, Labor Day and other covered holidays.
Q: To reduce absenteeism, can I require employees to work the day before and after the holiday to be eligible for a paid holiday?
A: Employers are generally permitted to require non-exempt employees to work the day before and after the holiday to receive holiday pay. Typically, employers don't apply this policy to employees who scheduled the time off in advance.
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Note: Employers shouldn't apply this type of policy to employees classified as exempt from overtime. That's because exempt employees must generally receive their full salary in any workweek in which they perform any work. |
Q: What if the holiday is also our payday?
A: The Federal Reserve and banks are closed on federal holidays, including Memorial Day, Juneteenth, Independence Day, and Labor Day, so direct deposits generally won't be posted to employees' accounts on that day. Keep in mind that some states require payment on the preceding business day, if a scheduled payday falls on a holiday. Absent such a requirement, employers generally have the option of paying employees on the business day before or after the holiday.
When your check date falls on a bank holiday and you wish to pay employees the day before, adjust your check date to avoid delaying payroll delivery.
Q: A veteran requested Memorial Day off. Do I have to grant them time off?
A: Check your state law. For example, in Massachusetts, all private employers must grant leave to a veteran employee who wants to participate in a Memorial Day exercise, parade or service. The leave may be paid or unpaid, at the discretion of the employer.
Q: If we’re open on a holiday, am I required to pay non-exempt employees a premium for working?
A: Under federal law, there's generally no requirement to pay non-exempt employees a premium for working on a holiday, unless it results in the employee working more than 40 hours in the workweek.
However, there are exceptions in some states where employers may be required to provide premium pay regardless of how many hours the employee worked. For example, in Rhode Island, unless the employer is exempt, non-exempt employees must be paid 1.5 times their regular rate of pay for any work performed on Memorial Day, Juneteenth, Independence Day, Labor Day and other covered holidays (or Sundays).
Q: I have a non-exempt employee who receives a paid holiday and will then work 40 hours in the same workweek. Would they be entitled to overtime for the workweek?
A: Paid time off doesn't count toward hours worked when determining whether overtime is due. Therefore, unless you promised otherwise, the employee wouldn't be entitled to overtime under federal law. Keep in mind that some states, including California, require daily overtime for hours worked over eight hours in a workday. In these states, the employee may be entitled to overtime under state law. Check your state law to ensure compliance.
Q: We offer employees two times their normal pay rate to work on holidays. Do I have to include holiday premium pay when determining an employee's regular rate of pay for calculating overtime?
A: Under federal law, the overtime rate is 1.5 times the employee's "regular rate of pay." An employee's regular rate of pay includes their hourly rate plus the value of nondiscretionary bonuses, shift differentials, and certain other forms of compensation. However, under federal law, premium pay for work on a holiday may be excluded from the regular rate of pay determination if it is at least 1.5 times what the employee receives for work performed in non-overtime hours on other days.
For example, let’s say an employee’s normal base wage is $12 per hour, but the employee is paid double that for work performed on Memorial Day. If they work 9 hours on Memorial Day and a total of 49 hours for the workweek as a whole, they would be owed: $216 (9 hours × $24) for the holiday work and $480 (40 hours x $12) for the other 40 hours worked in the week for a total of $696.
Since the holiday-work premium is at least 1.5 times the established rate for non-holiday work, it doesn’t increase the regular rate, and the employer may credit the amount toward statutory overtime compensation due. Keep in mind that your state law may have different rules.
Conclusion
Make sure you understand the rules that apply to your business and clearly communicate, and consistently apply, your policies on holidays.