Do you have to pay employees when you close for the holidays?

When a company decides to close on Thanksgiving Day or for the entire week between Christmas and New Year’s Day, is the employer required to compensate any of its employees? 

Non-exempt employees

For non-exempt (overtime-eligible employees), the company is generally not required to pay employees on days in which they do not perform work.  As long as all non-exempt employees are notified of the closure prior to reporting to work on the holiday, no pay is required.  If the non-exempt employee has accrued vacation or PTO time, the employee may request or the employer may require that the employee use accrued vacation or PTO to cover the days of the holiday closure. 

Exempt Employees

For exempt employees who are paid on a salaried or fee basis, federal law requires the company to pay the employee his or her regular salary without interruption for business closures that extend less than one full workweek.  Failure to provide this continued compensation is likely to jeopardize the employee’s exempt status. A workweek is the predefined seven-day period that the employer uses for payroll purposes. 

Unless the closure extends for a full workweek, the exempt employee should experience no interruption in salary for the purpose of a holiday closure.  The employer may require the exempt employee to use accrued vacation time or PTO time to cover the closure.  However, if the exempt employee does not have sufficient accrued time to cover the holiday closure, the employer is required to ensure the exempt employee experiences no interruption in salary. 

Company Policies

As a benefit to workers, many companies opt to pay non-exempt employees for certain holiday closures.  The company may set its policy in this regard, and it has a good deal of discretion regarding the payment and calculation of the holiday pay.

This may also include “shifting” the days of the recognized holiday so as to reduce the amount of vacation, PTO or unpaid time employees may experience during the holiday closure. We simply recommend creating a written policy regarding holiday pay and applying it consistently among employees.

It is important to understand that the employer is only obligated to consider the actual hours worked versus the hours paid when calculating overtime pay. If the employer provides paid holidays, they are not required to include the unworked paid holiday hours in the overtime calculation for a non-exempt employee.