Question:

I run a small business and plan to close for most of Thanksgiving week so that my employees and I can visit with family and friends, and enjoy the holiday. I was not going to pay my employees for the time off. Most of them seem fine with this and are grateful for the time off, but I’ve heard a couple of people grumbling about “having” to take time off without pay. Am I required to pay my employees for these days off? I’d rather just stay open for business if that’s the case.

Answer:

The answer to your question depends on whether your employees are categorized as “exempt” or “nonexempt” from the wage and hour laws contained in the California Wage Orders. As you are probably already aware, exempt employees generally perform duties that are managerial in nature, and are paid on an annual salary basis. In contrast, nonexempt employees are paid hourly, and are entitled to various protections under the Wage Orders. These protections include mandatory meal and rest periods, and overtime compensation if an employee works more than forty hours in one workweek.

Employers have flexibility when it comes to nonexempt hourly employees, and are required only to pay those employees for whatever hours they actually work. Because of this rule, you can close your business and any nonexempt employees will simply not be paid for the time that you are closed. In other words, if nonexempt employees work Monday and Tuesday of Thanksgiving week, they will be paid only for the hours worked on those days and will not receive regular compensation for the rest of the week. These employees may choose to take paid time off (e.g. vacation time) for the remainder of that workweek, or they may simply elect not to receive pay for the rest of the week while the business is closed.

Many businesses implement a paid holiday policy under which nonexempt employees are compensated for employer-designated holidays. These types of policies typically include all major holidays, and sometimes the day preceding or following such a holiday. If your business has such a policy, you are obviously obligated to pay your nonexempt employees according to its provisions.

In contrast to the “hours worked” rule regarding nonexempt employees, exempt employees must regularly receive—for each pay period—the full amount of their compensation. This means that exempt employees must receive their full salary for any week in which they perform any work, regardless of the number of days or hours that are actually worked. In fact, an exempt employee who works just one hour during the course of a workweek is entitled to his or her entire week’s salary. So, if your exempt employees were to work Monday and Tuesday of Thanksgiving week, they would be entitled to their entire salaries for that week, even if they did not work Wednesday through Friday.

The flipside of this rule is that exempt employees need not be paid for any workweek in which they perform no work at all, unless the business has been closed due to operational requirements and the employees are ready and willing to work.

If your employees are exempt, salaried employees, then, you have two options: you can close for a few days and still pay your employees their entire week’s salary, or you can close for the entire week, in which case your exempt employees need not be paid because they will not have performed any work.

If you do decide to close for an entire week, your exempt employees may also elect to utilize paid leave time, such as accrued vacation, so that they are not forced to take a deduction in pay. However, you should know that you cannot require your exempt employees to use up accrued vacation time or other paid leave time during the week that you are closed, unless you provide them with “reasonable notice” of that requirement beforehand. This means that the notice must be given as far in advance as possible, but generally no less than either one fiscal quarter or 90 days before, whichever is greater. Since Thanksgiving is only a couple of weeks away, you do not have enough time to provide “reasonable notice” of your Thanksgiving office closure. As such, it is up to your employees to decide whether they wish to utilize paid leave time during the weeklong closure.
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