If legal citations can be given that would be great too. I have to present this to the company owner on Monday to convince him that he's not just a small office sole proprietorship anymore and he has 18 employees all of whom are salary employees and apparently didn't get paid for any holidays the first 12 months they were there.

Am I not to be compensated for a particular amount per year? Especially if the office is closed beyond my control and I have no option to come in. The only stipulation, of course, is if the office is open and I am out sick or otherwise away and not working outside of agreed upon vacation time. Is that correct?

Please give as many details and sources on this as you possibly can.

Thank you very much.

Bonus question, are there legal regulations of what mandates a small business into a medium business and any sort of labor law/sallary law exemptions outside of taxes a classified "small business" can take advantage of that larger businesses cant?

If by "Exempt" you mean "Exempt Salaried", I can give you a pointer to the actual federal regulation. Not all "Exempt" employees are paid on a Salaried basis. The related rules in their entirety can be found in that regulation. There is no annual salary rule, which is why you will not find that "rule" in the regulation.
http://www.dol.gov/dol/allcfr/ESA/Title_29/Part_541/29CFR541.602.htm

There is nothing in labor law that considers "small" or "medium" business to be treated differently. Federal labor law is mostly the FLSA and this is something not discussed there. I am going to give you pointers to several of the more common federal DOL issued factsheets. Notice how these so-called small business rules failed to get mentioned anywhere.

http://www.dol.gov/esa/whd/regs/compliance/whdfs22.pdf

http://www.dol.gov/esa/whd/regs/compliance/whdfs23.pdf

http://www.dol.gov/esa/whd/fact-sheets-index.htm

The number of employees is irrelevant, as is how the employees are paid.

Any business who grosses more than $500,000 annually and who does any interstate commerce whatsoever is subject to the Fair Labor Standards Act (there's your legal citation - the FLSA is the primary law in this country determining the payment of wages to employees) regardless of the number of employees. Interstate commerce has been very broadly defined. Essentially, if you make so much as a phone call or buy so much as a pencil out of state, that's interstate commerce and you're subject to the FLSA. Virtually all employers are so we'll assume yours is as well.

All employees come in one of two categories. They are either exempt or non-exempt. One or the other. Most people tend to think hourly paid = non-exempt and salary paid = exempt, but that is not true. It is not how you get paid that determines your exempt status but your job duties. Not your title, your duties. Non-exempt employees MUST be paid overtime if they work over 40 hours in a week (VERY limited exceptions apply but they do not sound as if they apply here) - exempt employees are NEVER due overtime no matter how many hours they work. Non-exempt employees can be paid on salary as long as they also get overtime when due; in some limited situations exempt employees can be paid hourly.

The rules regarding time off are different. If you are a non-exempt employee, then barring the very limited exception referred to above and one or two others which are state specific and do not apply in your situation anyway, you never have a legal expectation of being paid when you do not work. Not on vacation, not on holidays, not when you call in sick, not when you come in late or leave early, not at all. if you don't work, the FLSA does not require that you be paid. An employer may offer paid vacation, or paid sick leave, or paid holidays, but as far as the FLSA is concerned that is a gift from the employer. A state could require that an employer pay for such time, but with the exception of a few states that require paid time off to vote or to be on jury duty, no state has done so. (A couple of states have begun to require paid leave in some medical situations.) No Federal law and no law in any state requires an employer to provide paid holidays to non-exempt employees.

If you are an exempt employee, however, the rules are different. Exempt employees must receive their full salary in every week that they work even a little. There are six, and only six, exceptions to that:

1.) If it is the first or last week of employment and you do not work the full week
2.) If you are on FMLA
3.) IF the employer offers a reasonable number of paid sick days, and you call in sick when you have either used them all up or are not yet eligible for them
4.) If you VOLUNTARILY take a full day off for personal reasons
5.) If you were suspended for a major safety violation
6.) If you were suspended for a written company policy which all employees are subject to and which relates to workplace conduct

So, to get to your question:

If you are non-exempt they have no legal obligation to pay you for any holiday. Not even Thanksgiving or Christmas. No matter how you are paid.

If you are exempt, then you cannot be docked for holidays unless you did not work at all during the week in which the holiday fell. No matter what you signed.

Since you did not indicate your job duties, it's impossible for us to say if you are exempt or non-exempt. If you would like to give us a detailed description, we can make an attempt.

Thanks for the responses guys.

I am salaried and exempt. I am not paid hourly but on a yearly salary.

So it would seem that if I agreed to a yearly salary of say $75,000, that should mean that somehow or another I get the full $75,000 in that year and no less regardless of if the owner doesn't want to be open on a day or two or 10 spread out over the year.

The only reason why I shouldn't get the full $75,000 as I understand it is if I am sick without paid leave/sick days available or as you mentioned take a personal day.

Is this correct?

No, not quite. The FLSA does not look at yearly amounts but weekly. If you were to leave before the year was up, nothing in the FLSA would entitle you to be paid the full $75,000 unless you had a bona fide, legally binding contract that SPECIFICALLY said otherwise.

The FLSA is only concerned with week by week. Whatever your WEEKLY salary is, it can only be reduced under the circumstances set forth above. This assumes that you are correctly classified as exempt.

Right, however I meant it as in a full year was assumed to be worked.


In terms of qualification:
I am the director of their new-ish IT department, and basically do everything that has to do with their network, internet, website and e-business. Also, I am pretty certain we are all some form of exempt because we all work more than 8 hours per day to stay open longer for the west coast as we are on the east coast. Otherwise the business would have to pay a lot of overtime every day.

It has nothing to do with years. Your salary might get raised, or lowered, for unrelated reasons. The FLSA is unconcerned with years. The FLSA is only concerned with whether, on a WEEKLY basis, you are paid the pay that is appropriate FOR THAT WEEK. Not with whether, at the end of the year, your annual salary and your offer letter exactly coincide.

I understand what you are trying to say, and I understand that the FLSA isn't going by the year. I am trying to say that this would be assuming that $75,000 worth of payments would have been due by the end of the year worked; paid in installments every two weeks. As in, all 52 weeks would be assumed to have been worked toward the $75,000/yr rate that is the same at the end of the 52 worked weeks.

With that said, $1442 is due each week. $865 was paid in this scenario due to a deduction of 2 days for Thanksgiving. This will also probably happen again for 2 days for Christmas Eve/Day and 2 more days for New Years Eve/Day.

Leave the numbers out of it. I'm not a mathematician and I don't really want to get out my calculator. If DAW or Patty wants to do the math, they can.

They cannot dock you for holidays unless you didn't work any part of the work week. I will not get into how many dollars you are due per week.

Alright thanks for the information CBG. I wasn't asking for that kind of breakdown on how many dollars are due per week but clarifying that there was a deduction made over a holiday period when their offices were closed. I did the math on it for the sake of consistency of the example. (Also I didn't give my real salary, so I didn't post that information for a complete breakdown of dollars and cents.)


A follow up,
Does this also include any other time the office is closed for any reason as well for 1-4 days in any given 5 day work week regardless of holiday?

Yes, it does. If the exempt employee has no option but to not work (horrible grammar but you get my meaning) you have to be paid for it. They cannot dock your pay for any reason except the six above. However...

I'm not sure if I made this clear above so forgive me if I'm being redundant. The employer CAN require you to use vacation, sick, personal or other paid leave with or without your permission or consent. So if they want to close the office (for any reason, including holidays) and require that you use vacation time for it, they MAY do that. They cannot dock dollars out of your paycheck but they can dock leave balances. The Feds have gone on record as saying they do not have any interest in what happens to leave balances and while a state conceiveably could do so, only California has made even the most minimal effort to control how paid leave is used. Some states (not Pennsylvania unfortunately) have laws about what happens to unused vacation at termination but not how it's used while you are employed.

Annual salary / 52 = weekly salary, such weekly salary subject to deductions only in the limited situations cbg cited. Each workweek stands alone.

Thanks cbg and Pattymd.

Now, what happens if I were to make the company aware of this and they still do not want to change policy and will be making further deductions on xmas and new years?

What sort of penalties and/or fines and/or action/other negative would there be if we, say, hired another employee who isn't as concerned about compliance as a company as I am and just simply reports this company to the labor board?

If the company chooses not to be compliant with the FLSA, every so affected employee should, IMHO, file a claim for unpaid wages if their exempt salary is illegal docked. The more the merrier. :p

Understood. However existing employees are legacy to the business when it was just a sole proprietorship by a self made individual who was working so hard such things haven't really come up until now. In this respect, he has "trusted individuals" working for him with the legacy understanding that corners needed to be cut at the time to build the business over the years. Kind of like the amount of work required to build the entrepreneurship to it's current state has sheltered the need to learn and come to know these things. Does that make sense?

The concern is for new employees and their expectation coming into our business and the need to show demonstrable evidence and information to the owner on why we need to be more compliant now more than ever.
In these economic times it becomes even more challenging expressing the need for this change because off the top to the owner it means immediate paying out of such things to the employees to be compliant when we don't have a lot coming in right now in terms of revenue.

Are there specific penalties and fines in addition of being held liable for each employees back overtime and holiday pay for up to 3 years when we lose our exemption status should someone file a claim?

Generally not, as long as the employer makes it right, unless the DOL can show an intentional violation.

The violation is very intentional. They are very aware of the labor laws now and only do this to get away from having to pay things like overtime and follow the FLSA. If I have to leave early, I am docked the time I am not there in pay.

It's almost exactly like we are hourly under the table. But on the surface we are being called salary exempt. My professional designation (and what I was told by them when I was hired) would mean I should be salary exempt.

The struggle is, I have to somehow show official information on the cost ramifications not complying with these laws would cost him before he got rid of this policy.

Where is the incentive/threat to really actually feel the need to change policy?