HR Alert - Regulations of a Holiday Shutdown.

• If no work is available for the entire workweek, as in the case of vacation/holiday shutdown, no salary need be paid. (In this case, make sure exempt employees earn the minimum monthly salary of $2,340)
• The employer does not have to let employees use vacation or personal time off (“PTO”) to make up lost salary, but may choose to. If you require employees to use their accrued vacation or PTO, you must provide them 90 days notice specifying this requirement.
• When considering a holiday shut-down, be aware of when your workweek starts and ends, and where the holidays fall (see example below).

Holiday Shutdowns & Exempt Employees

According to the California Labor Commissioner, an employer must pay an exempt employee a full week’s pay for any workweek in which the employee performs any work. If no work is available for the entire workweek, as in the case of vacation shutdown, no salary need be paid. The employee’s exempt status will remain intact as long as the exempt employee is paid a monthly salary of at least twice the state minimum wage, based on a 40-hour workweek. Currently, the minimum monthly salary for exempt employees is $2,340. This could be an issue for employers that shut down operations for a period of a week or longer.

Employers do not have to let exempt employees use vacation or personal time off (“PTO”) to make up lost salary. An employer may adopt a policy or have individual employment agreements that govern whether employees may apply vacation or PTO pay during a shutdown. However, an employer may not require employees to use accrued vacation time or PTO during vacation shutdowns unless it has a policy or an employment agreement specifying the requirement and has given reasonable notice of the specific period in advance. Reasonable notice is defined as notice “as far in advance as possible but generally no less than one full fiscal quarter or ninety days, whichever is greater.” greater.”

Finally, if an exempt employee takes a partial day off for personal reasons, or if the employer tells the employee to do so because the work load is light, the employer may not dock the employee’s salary the balance of the day from his/her vacation or PTO bank. Employers must generally pay exempt employees for a full workweek in which any work is performed, no matter who initiates the request for time off.

The only permissible exception is where an exempt employee requests and is granted a full day off for his or her own personal reasons. In this instance, an employer may dock the employee’s salary for the entire day, and the exempt employee may elect to make up the loss from accrued vacation or PTO.

In applying these rules, an employer must remember its defined “workweek.” Many employers’ workweeks start at 12:01 a.m. Sunday and end at midnight on Saturday. If a workweek runs Sunday through Saturday and the employer shuts down for Christmas through New Year’s Day, exempt employees are entitled to full pay for both weeks in which the holidays fall. This is because employers will have performed some work in both work weeks.

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