Watch Out for Wage and Hour Requirements During Holidays

Overtime calculations and time-keeping must be accurate

Allen Smith, J.D. By Allen Smith, J.D. December 15, 2017
Watch Out for Wage and Hour Requirements During Holidays

Wage and hour laws don't take a holiday. Make sure you comply with requirements on seasonal bonuses, time-keeping, staffing and predictable scheduling.


How should you account for end-of-year bonuses? They are either discretionary—at the sole choice of the employer to award and not expected by employees—or nondiscretionary—where the employer predetermines the specific criteria required to receive a bonus and employees expect the bonus if they meet the criteria.

[SHRM members-only how-to guide: How to Calculate Bonuses into a Regular Rate of Pay for Overtime Purposes]

Employers must be sure to properly calculate overtime for nonexempt employees, particularly when they receive bonuses. As with other bonuses, a holiday bonus generally is included in overtime calculations for nonexempt employees unless it is completely discretionary or is a gift, noted Christopher Hampton, an attorney with Meltzer, Lippe, Goldstein & Breitstone LLP in Mineola, N.Y. Even a vague promise that an employee will receive a holiday bonus could be enough to make the bonus nondiscretionary, he cautioned.

If a manager says without prior announcement at Christmas Eve, "We had a good year. Thanks for all you've done' " and gives a bonus, that would not be included in the regular rate, said Lee Schreter, an attorney with Littler in Atlanta. But if a bonus is tied to an undesirable shift, is expected or is designed to make employees perform better, it's nondiscretionary and included in overtime calculations, she said.

If employees have been led to expect a holiday bonus because the employer pays it regularly or a bonus is based on seniority, the bonus still may be excluded from overtime calculations if it is a gift for the holiday season, Hampton noted. For example, a bonus paid—not pursuant to a contract—in the amount of two weeks' salary to all employees, plus an equal additional amount for each five years of service would be excludable from the regular rate of pay as a gift.

"However, a bonus is not considered a Christmas or holiday gift if the gift is tied to certain performance metrics, such as hours worked, production or efficiency," he said.


Accurate recording of all working time during the holidays is essential, Hampton noted.

During the holidays, employers may require nonexempt employees to work more overtime hours than usual or hire seasonal workers unfamiliar with the need to record hours, noted Carrie Gonell, an attorney with Morgan Lewis in Costa Mesa, Calif., and New York City, and Alicia Farquhar, an attorney with Morgan Lewis in Palo Alto, Calif., in an e-mail to SHRM Online. That even includes extra efforts like running errands at the direction of the boss for the office holiday party, they wrote.

Be prepared to pay for any mistakes: If the employer does not have accurate time records for a nonexempt employee or a worker misclassified as exempt, there will be a presumption that the time a plaintiff claims to have worked is correct, noted Michael Billok, an attorney with Bond, Schoeneck & King in Saratoga Springs, N.Y.


If retailers did not hire enough nonexempt employees for the holidays, causing exempt employees to primarily perform nonexempt tasks, their exempt status may be endangered, Schreter cautioned.

In California, the exemption test is quantitative, and an exempt employee must be engaged in exempt duties more than 50 percent of the time, Gonell and Farquhar said.

"There is not a hard-and-fast rule under the Fair Labor Standards Act for how much time an employee spends on a duty before it becomes a primary duty, but we tend to use 50 percent as a rule of thumb," Billok noted.

Some tasks that appear on first glance to be nonexempt may be exempt. For example, an exempt employee may demonstrate to seasonal employees how to put merchandise on the floor. This would be an exempt duty because the manager would be training an employee, Schreter said.

Training is particularly important this time of year, she said. Seasonal employees not only need training on wage and hour issues but also harassment prevention. Skipping it "can have disastrous results."

Predictable Scheduling

Cities and states increasingly are adopting predictable scheduling laws that "put incredible strains on employers, particularly in the retail industry, during the holiday season," Hampton said.

Several cities, including New York, San Francisco, San Jose and Seattle, have adopted laws on fair scheduling that require the advance release of employee schedules and penalize employers that do not give employees adequate notice of schedule changes, Gonell and Farquhar stated.

The various requirements create compliance headaches for employers operating in numerous places, they said:

[SHRM members-only multistate coverage: Multistate Employer Resources]

  • Seattle's law restricts "clopenings"—where an employee is required to close a location at the end of one day and subsequently reopen a location the next morning.
  • A New York City law bans on-call scheduling for retail employees and requires they be provided with 72 hours' notice before being required to work.
  • Another New York City ordinance requires fast-food employers to provide new hires with an estimate of their work schedule at the start of their employment and to give existing staff their schedules 14 days in advance.
  • The San Jose ordinance is not limited to retail and fast food employees. It requires covered employers to offer additional work hours to existing qualified part-time employees before hiring any new worker.
  • Oregon passed a scheduling law, effective July 1, 2018, that covers employers with 500 or more employees in the retail, hospitality and food service industries, requiring them to schedule employees in writing seven calendar days in advance, Billok noted.
  • "Not to be outdone, the New York State Department of Labor just proposed scheduling regulations that would affect most state employers, requiring 14 days advance notice with additional wages due for schedule changes made within 72 hours of a shift," he added.

It can be helpful to communicate a game plan to managers so they know how to handle any workflow issues that arise when they have unexpected staffing needs, Gonell and Farquhar wrote.


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