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Legal Clinic

Holiday Pay Can Be Problematic

The July 4th holiday is recently behind us, and in these lazy days of summer it appears that a fair number of people are focused on pay issues related to holidays. "Not all employees are treated equally" is the recurring mantra. And as explained in response to the questions below, in the context of paid leave or other benefits, differentiation may be entirely lawful.

Monday, July 16, 2007
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Question: If our school pays holiday pay in addition to regular hours worked to one nonexempt group of employees (i.e., office staff) who work on a company-designated holiday, are we required to pay all categories of employees (i.e., maintenance workers) the same?  Or can we differentiate between departments?

Answer:  Arising in the context of a school, this inquiry potentially implicates several different types of legal obligations, as well as practical considerations.  First, looking most broadly at federal law as applied to any type of employer (public or private), it is generally permissible to differentiate among different types of job functions or departments with regard to paid leave or other types of benefits. 

Of course, such differentiation could be problematic if it is directly or indirectly based on protected characteristics such as race or gender.

Second, if the employer is a public school or other governmental entity, state or local laws may dictate certain obligations with regard to holiday pay or other benefits.  For example, many states require employers to pay state employees holiday pay, or provide other paid leave benefits.

Third, to the extent certain groups of employees (at a school or any other entity) are governed by a collective bargaining agreement, the terms of that agreement would be controlling.  It is fairly common for a collective bargaining agreement to provide that members of the bargaining unit receive holiday pay at a prescribed rate, or similar paid leave. 

The collective bargaining agreement may also include a provision requiring the employer to offer union employees any benefit that it is offering to non-union employees that would be more favorable than those already provided under the collective bargaining agreement. 

Finally, as a practical matter, employee morale may be affected when an employer differentiates between departments with regard to paid leave or other benefits.  In some situations, an employer may find it necessary to offer a special benefit to employees in a particular department. 

This may be the case, for example, if a department has been experiencing high turnover or employees have otherwise been working unusually long hours.  In other situations, morale may suffer in excluded departments as a direct result of differentiation. 

Thus, such decisions must consider all the circumstances unique to the particular workplace.

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Question: If we grant holiday pay to nonexempt employees for working on a holiday, isn't it discriminatory to not also give that holiday to nonexempt employees who have the day off?

Answer: No, it is not discriminatory to pay people something in excess of straight time when they work a company-designated holiday, even if the employees who have the "holiday" off are not paid for their absence. 

The same legal parameters with regard to state- or contractually mandated holiday pay apply with regard to this type of holiday-pay differentiation as they do when the differentiation is between employees in different departments.  Aside from those considerations, however, employers are not otherwise obligated to pay nonexempt employees for time not worked. 

Thus, provided the employer's practice is applied in an even-handed manner, so that all similarly situated, nonexempt employees who work a holiday receive the same form of compensation (i.e., pay at time-and-a-half or double time, or straight pay plus a holiday-worked bonus), it is permissible for an employer to decline to offer any compensation to those employees who do not work on a company-designated holiday.

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