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You are not required to offer employees time off for holidays, nor are you required to pay for time for holidays granted. If you do offer paid holidays, you choose the holidays that you observe. You also determine eligibility requirements and any requirements for the payment. You can also require that a nonexempt employee be employed for some specified period of time before being eligible for holiday pay.
Exempt employees must be paid if they are ready, willing and able to work and no work is available, such as on a holiday when the company is shut down. Exempt employees who perform any work during the workweek in which a holiday occurs must be paid their full weekly salary, whether or not they work on the holiday.
If you are closed on a payday that falls on a Saturday, Sunday or a holiday listed in the California Government Code, you can pay wages on the next business day. For more information, see Timely Payment.
Depending on your business, you may not be able to give everyone a holiday at a specific time during the year. If commonly celebrated holidays occur during your busiest season or if you merely want to give more flexibility to employees who celebrate other holidays, you can decide to designate a specific number of personal holidays.
At the beginning of each year, announce which holidays you will grant, if any, and if you will pay for the time. The following holidays are those most commonly granted in California:
If you provide paid holidays, you will need to explain what will happen if an employee is required to work on a day you designate as a paid holiday. The courts interpret the policy of giving a paid day off as a contract to do so. Therefore, you must make up the lost benefit to the employee in some manner:
Establish a policy for the situation where a holiday falls on a day that is the employee’s usual day off. If it is your policy to give that holiday as a paid day and you pay all other employees for that holiday, then also pay the employee in question for the holiday unless your policy clearly specifies otherwise.
When an employee quits or is terminated, you need not pay for future holidays.
If you offer paid holidays as a benefit, include the following information in your employee handbook:
Under California’s Healthy Families, Healthy Workplaces Act, you cannot deny employees the right to use mandatory paid sick leave or in any manner discriminate against an employee for using paid sick leave. Enforcing a policy in a way that denies an employee additional compensation as a result of the employee using their accrued sick leave would be in violation of this Labor Code section.
Therefore, if one of your employees called in sick (and had accrued sick leave available) before and/or after a holiday and you failed to pay the employee the holiday pay, you could be in violation of the anti-discrimination provisions of the paid sick leave law. For more information, see Paid Sick Leave. The same concern will also arise if you try to deny holiday pay when the employee is using other types of protected leave, except in limited circumstances.
Though not required to by law, employers can choose to offer employees floating holidays (sometimes called personal days) as a benefit.
How your organization's policy defines floating holidays, and how employees may use them, determines whether they are a vested benefit. If they are similar to vacation time they will be vested, and therefore you may not apply a use-it-or-lose-it policy, and must pay employees for unused days at the end of the employment relationship. On the other hand, some floating holidays may be more like traditional holiday pay, which is not a vested benefit and can be subject to a use-it-or-lose-it policy and does not have to be paid at termination. The main determining factor is whether floating holidays are connected to a specific event.1
If a floating holiday is connected to a specific event, such as a birthday or years-of-service anniversary, it is not considered a vested benefit and would not need to be paid out at the time of termination if the specific event had not yet occurred. For example, if your company policy grants a floating holiday to each employee to be used on their birthday, an employee who terminates prior to his or her birthday would not need to be paid out for that floating holiday.
If an employee can use floating holidays at any time for any reason, and they are not tied to any specific event, treat them as vested vacation time.2 For example, your policy may allow an employee who wants to take a Friday off to go away for a long weekend to choose whether to use a vacation day or a floating holiday. If so, your floating holidays are not tied to a particular event and are treated the same as vacation. An employee who terminates prior to using these kinds of floating holidays must be paid out for any remaining balance.
You can place a reasonable cap on the accrual of floating holidays. You must give the employee a reasonable opportunity to take floating holidays so that they can stay below the cap. For more information, see “ Reasonable Cap on Accrual Allowed ” on this page.
You could also pay the employee at the end of the year for any accrued and unused floating holidays or allow the employee to carry over all accrued and unused floating holidays.
If you fail to pay out accrued and unused floating holiday wages at termination, employees can file a wage and hour claim with the Labor Commissioner or in superior court. If the employee wins, they can collect a waiting time penalty of one day’s wages for every day that the wages were unpaid, up to 30 days.
1. DLSE Enforcement Policies and Interpretations Manual sec. 15.1.12
2. DLSE Enforcement Policies and Interpretations Manual sec. 15.1.12