You likely got into business to chase your dream and follow your passion. Unless you love the laborious Federal Code, you likely did not start your business to memorize and focus on labor laws. If you have employees, however, there are a few basics of labor laws you need to know and Labor Day Weekend is the perfect opportunity for an annual brush-up.
By Travis Crabtree
Let’s Talk Holidays
Do you have to give your employees time off on Labor Day or other federal holidays paid or otherwise? The short answer is no. For most private employees that are not subject to a collective bargaining agreement with union employees, there is no legal requirement to give your employees off on federal holidays. If your employees work on Labor Day, or another federal holiday, you also do not have to pay them more or give them time off on some other day. There is no federal law that requires “Holiday Pay.”
That’s the cold-hearted legal answer. But, just because you can make everyone work on federal holidays, doesn’t mean you should. While giving every single federal holiday off may be overgenerous (can’t miss the Presidents’ Day sale), it is wise to let your people off on the most common federal holidays.
What About Vacations?
There is also no legal requirement to give vacations either. Employers can even give vacation time to some employees and not others (such as full time vs. part time, but employers still cannot discriminate based on things like race, gender or age). Again, unless you are a government employer or subject to a collective bargaining agreement, there is no law that requires vacations. The employer would be foolhardy to not provide some vacation benefits, but there is no minimal requirement set by federal law.
If you do implement a vacation policy, do take care about whether you apply a use it or lose it policy. Some states consider “earned vacation time” as “earned wages” and therefore a company cannot force an employee to forfeit vacation time if they quit or if they don’t use it before the end of the year. Many of these states do allow for reasonable caps of accrued vacation so employees can’t forego vacations for five years and then take off for 3 months of paid vacation. To be safe, you need to check the rules in your particular state or you can check with your state’s labor department.
Paid Sick Leave
There is also no general federal law that requires companies to give paid sick leave. If an employee asks off because of an illness or the need to take care of family, the Family Medical Leave Act may require the company to grant unpaid time-off, but the FMLA does not require paid time off. There are some bills in Congress that may require paid time off in the future, but no current federal law requires it.
However, some states and even some cities are now requiring companies to grant paid sick leave. For example, California law says employers have to give at least one hour of paid sick time for every 30 hours worked. Cities like Dallas and San Antonio in normally pro-business Texas recently enacted similar paid sick leave laws for companies based in those cities or for companies who employ individuals that reside in those cities.
For the most part, the federal Fair Labor Standards Act requires companies to pay overtime at a rate of time and a half to covered employees for any hours worked in a week in excess of 40. While the rule seems straight-forward, there are a few landmines employers often trip on when it comes to overtime.
The first is the proper classification of employees. Some companies try to avoid overtime (and benefits or some taxes, too) by classifying individuals as independent contractors as opposed to employees. There are numerous factors that go into whether someone is an employee versus an independent contractor, but the primary issue is the level of control exercised by the company over the individual. The more control exercised, the more likely the person is an employee and therefore would be entitled to overtime.
Equally important is properly classifying employees as exempt (not eligible for overtime) vs. non-exempt (eligible for overtime). Generally speaking, salaried executives, supervisors, professional or outside sales positions are exempt. To be exempt, these employees must also be paid at least $23,600 annually. Most others, even if highly paid, are not exempt and therefore are entitled to overtime.
Finally, companies need to employ proper time keeping measures to stay in compliance with the overtime rules. Assuming you have non-exempt employees, it is the company’s responsibility to document and keep track of the hours. If no records are kept and the employee claims they repeatedly worked more than 40 hours, the employee starts off ahead and the burden of proof is on the employer to prove otherwise. For that reason, it makes sense to require non-exempt employees to clock in even if they are paid a salary and not hourly.
The last stumbling block is the helpful employee, the employee who eats at their desk or the non-voluntary after hours event. Even if the employee voluntarily works extra just to get ahead or help the company catch up, they are entitled to overtime. Does the employee who eats lunch at their desk really have the time off or are they expected (or do they voluntarily) handle work tasks here and there? This is why many lawyers suggest employees not be allowed to eat lunch at their desk. Do you have a non-exempt employee who has agreed to help with an after-hours event for your customers or help move the office on the weekend? Each one of these employees is likely due overtime pay. While a friendly employee may not demand it, it is due and the employee may not always be friendly, creating much more trouble than paying them time and a half for a few hours.
Conclusion: Assess Your Policies Now
2019 will mark the 125th anniversary of celebrating the American worker with the federal holiday of Labor Day. Most companies understand their employees are extremely important. Most also celebrate the strides made to provide workers more rights and improve their conditions. These improvements, however, require employers to have a basic understanding of the law so companies can not only celebrate their employees, but stay in compliance as well. This Labor Day is a good time to celebrate your employees and make sure you are also treating them the way the law requires.
Travis Crabtree is the President and General Counsel of online business filing company Swyft Filings and Counsel with the law firm of Gray Reed & McGraw, LLP in Houston, Texas. Swyft Filings has helped form and maintain tens of thousands of companies in all 50 states with all their filing and compliance needs. His law practice focuses on assisting start-up and technology companies with all their legal needs.