Does Your Floating Holiday Need an Anchor?

December signals the time when payroll departments are tasked with an additional host of responsibilities to make sure the company is well-positioned to start the new calendar year – from verifying employee data for the processing of  W-2s to ensuring that new tax forms align with the payroll system.

Although employees’ adherence to the Company’s paid holiday schedule during the year might not be on the list of things to review; It should be, particularly when the Company’s benefits include a ‘floating holiday’. Attendance records and company policy must be reviewed to answer two very important questions – Who used it? Do they lose it?

The Division of Labor Standards and Enforcement is clear in their position that when an employer offers time-off ‘without condition,’ it is presumed to be vacation, regardless of the creative names we may assign it. As such, a floating holiday must be treated like vacation, i.e. no use-it-or-lose-it policy, and unused floating holidays must be paid out at termination, unless the extra day off is tied to a specific event.

To “tie” the floating holiday to a specific event, employers must make sure that their holiday policy clearly spells out which occasion(s) the benefit may be used. For example, the policy could state that the floating holiday can be taken on the date of a specific event such as the employee’s work anniversary or birthday. Employers may also allow employees to choose from a menu of permissible days that could include the employee’s work anniversary or birthday, or perhaps other holidays that the Company doesn’t already observe. Lastly, employers who wish to give their team more flexibility can permit them to designate any day of their choosing as a floating holiday provided they do so at the start of the year and their selection is documented in writing. While this option is generous, it is also administratively burdensome.

In summary, CA employers should protect themselves from the unanticipated costs of banking unused floating holidays from year to year and/or paying out the unused benefit to separating employees by tethering the benefit to a specific date. Additionally, Company policy should provide explicit details on how the benefit can be used. If your Company needs help navigating the murky waters of any wage issues, floating or otherwise, reach out to us so we can provide a buoy!