Q: Under our benefits policy, employees are not eligible for paid holidays until completing 90 days of employment. Can we reduce a recently hired, exempt employee’s weekly salary by a day’s pay when the company is closed for a holiday prior to his reaching the 90-day threshold?
A: Start with the premise that an employee, properly classified as exempt (from minimum wage and overtime) need not be paid for any workweek in which no work is performed at all during the course of the week.
However, deductions for partial or full days of no work may be made only in limited situations as stipulated in state and federal laws and regulations, and your case does not appear to be one of the permissible instances.
In fact, there is regulatory language that appears to apply in your case that forbids a reduction in the employee’s weekly pay:
“No deduction of any kind shall be made for any part of a workweek absence that is attributable to lack of work occasioned by the operating requirements of the employer.”
Presumably the employee is available to work, but no work is provided/scheduled due to the operating requirements of the business, i.e., a company holiday.
If on the other hand, work was scheduled that day for employees interested in working on the holiday, and an exempt employee who preferred not to work, requested the day off as a personal day, then another section of the law would permit a reduction in salary, but only in full-day increments:
“Deductions may be made for one or more full days if the employee is absent for personal reasons other than sickness or accident.”
Another approach is to provide the exempt employee the time off as a paid holiday and charge the day’s pay against paid time off benefits he will be entitled to in the coming year once he has completed his first 90 days of employment, thereby reducing by one day’s wages the amount of PTO he will have available during the coming year.