Remember when a snow day meant no school and neighborhood snowball fights? The challenges of navigating winter weather closures can be far more difficult when you’re running a company. What if your company closes for a week between Christmas and New Year’s; are you required to pay employees? The following guidelines should help you determine your legal obligations for these common winter payroll issues.
If your company closes at the discretion of management due to inclement weather, your payroll obligations will differ between exempt and non-exempt employees.
- Exempt Employees: According to the FLSA (Fair Labor Standards Act), an exempt employee must be paid for the full week if any work is performed during that week. This is known as the salary basis. If an exempt employee works Monday-Thursday but is unable to work on Friday because the business closes due to inclement weather, you would be required to pay them for the full week. As an employer, the best strategy to avoid payroll liability and ensure a productive workforce is to remind employees of anticipated winter weather and encourage them to prepare for remote work whenever possible. Employers may also wonder if they can require employees to use PTO. Generally speaking, the FLSA permits this practice. The best approach is to notify employees in advance and be consistent and reasonable for exempt and non-exempt employees. For example, you can send an email at the beginning of the winter season clarifying that employees will be required to apply paid leave to any weather closures if they are unable to work remotely.
- Non-Exempt Employees: For non-exempt employees, an employer must review state laws closely to determine if reporting or “show up” pay is due. Federal law is silent on the issue of reporting pay but several states (California, Connecticut, DC, Massachusetts, New Hampshire, New Jersey, New York, Oregon, and Rhode Island) have laws requiring this kind of compensation. Let’s imagine that a non-exempt employee in California reports for an 8 hour shift at 8 AM, but is subsequently sent home by management at 10 AM when it starts to snow. The employee must be compensated for 4 hours of pay, half of what they could have expected to earn. Laws regarding the amount of reporting pay due vary state to state and some states have different laws governing pay for minors so employers should consult with an HR professional to make the correct determination for their operations. If a non-exempt employee performs no work at all, the employer is not obligated to pay them.
Closed for the Holidays
If your company shuts down during the holiday season, it’s important to think about how the furlough will affect the salary basis for your exempt employees. As discussed earlier, federal regulations require that an exempt employee receive a full week of pay for any week during which they perform work. Therefore, an unpaid furlough spanning an entire work week would be legal whereas an unpaid furlough from Wednesday to the following Wednesday would threaten the salary basis and exemption status for exempt employees. As discussed earlier, non-exempt employees do not need to be paid during the furlough unless they perform work; and you can require both exempt and non-exempt employees to apply PTO. In summary, here is a list of best practices to follow in planning for furloughs:
- Provide advance notice of the dates and any requirements to use PTO
- Ensure that unpaid furloughs line up with your normal work week (remember that the FLSA allows employers to establish their own work weeks as long as it’s consistent.)
- Emphasize to exempt and non-exempt employees that no work should be performed during the furlough
Paid Holidays and Holiday Double Time
Contrary to popular belief, employees are not entitled to paid holidays nor are they entitled to special rates of pay for performing work on a holiday. These practices have developed according to common custom and many employees mistakenly believe paid holidays or double time on holidays are legal entitlements. The best way to approach this issue is to communicate with employees clearly regarding expectations and business operations. If you operate a restaurant that serves meals during all major holidays, the corresponding scheduling requirements should be communicated to perspective employees during the hiring process. You should also be consistent in whatever decisions you make. Paid holidays are typically communicated in writing and any supplemental pay for working on holidays should be given at the same rate to all employees.
Figuring out the legally or ethically correct way to handle these issues can be challenging as it involves the interplay between regulations, expectations, and company policy. It’s also important to note that these guidelines assume your employees are already classified correctly as exempt or non-exempt. If you have any questions regarding these issues, feel free to call the HR experts at Helios.