'Do I Have to Offer a Paid Holiday on Memorial Day?'
With Memorial Day approaching, employers may have questions about providing time off to employees and the pay requirements for employees who do work on Memorial Day. To help you understand the rules, here are answers to frequently asked questions about the holiday.
Q: Do I have to offer Memorial Day as a paid holiday to employees?
A: Unless you are required by contract or agreement, private employers are generally not required to provide Memorial Day as a paid holiday to non-exempt employees (those entitled to minimum wage and overtime). However, if your company closes for Memorial Day, 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.
Q: If my company offers paid holidays to non-exempt employees, must I observe Memorial Day as one of them?
A: Employers may generally choose whether to observe Memorial Day as a paid holiday. While some states have laws that restrict certain types of businesses from opening on Memorial Day, these laws don't require employees to be paid for this time off. That said, Memorial Day is one of the most common paid holidays and an important one to many applicants and employees.
Q: Can I require employees to work on Memorial 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 and other covered holidays.
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: To reduce absenteeism, can I require employees to work the day before and after a 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 a holiday in order to receive holiday pay. Typically, employers don't apply this policy to employees who scheduled the time off in advance.
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 Memorial Day is also our payday?
A: The Federal Reserve and banks are closed on federal holidays, including Memorial 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: If we are open on Memorial Day, 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 Memorial Day, 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 or another covered holiday (or Sundays).
Q: I have a non-exempt employee who receives a paid holiday on Memorial Day and will work 40 hours in the same workweek. Would this employee 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 Memorial Day. 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 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.
Learn more about paying your people.
This article was originally published as an "ADP HR Tip of the Week," a communication created for ADP's small business clients.
