Do you Understand California's Floating Holidays Rules?

California's Floating Holidays Rules

Many employers in California, as part of the paid time off benefits they provide to employees, offer a Floating Holiday. Like all paid time off granted to employees, Floating Holidays are a nice extra little gift used to promote morale and work-life balance.

Many employers will grant a Floating Holiday that is tied to a specific event, for example, the employee’s birthday. Other employers will just grant a day to the employees to be taken whenever the employee wants and for whatever reason they choose.

Like paid holidays and other paid time off, providing Floating Holidays is not a legal requirement. However, if your company decides to offer them, they must be fair and consistent in how they grant the time. For example, if you decide that full-time employees will receive 1 Floating Holiday every year, you must grant 1 Floating Holiday to all full-time employees every year.

Sounds simple, right? But in California, things are never as simple as they seem.  Employers who wish to grant Floating Holidays need to be careful about how they decide to set up their Floating Holiday program so that it is clear how and when employees can use the Floating Holiday and if they need to pay out untaken Floating Holiday at the end of the employee’s employment.

There are two ways to set up a Floating Holiday program. The first is to treat the Floating Holiday as unrestricted. Employees can take a day off any time they chose, regardless of the occurrence of any other event. With this approach, courts are likely to treat floating holidays as simply vacation by another name. As such, any unused floating holiday must be paid out at the time of the employee’s termination, along with any other wages owed. Also, with this approach, you would not be able to have a “use it or lose it” provision. Instead, you can cap the Floating Holiday at, for example, 1 day so there is never more than 1 day's worth of liability.

The other approach is for the employer to tie floating holidays to the occurrence of a specific event. This approach requires that floating holidays be used on or near specific days (such as on or near the employee’s birthday). The right to take the day off does not arise until the occurrence of the event to which it is tethered; that is, if the employee is no longer employed upon reaching a birthday (in this example), the right to take the associated floating holiday never happens. In that case, the floating holiday would be treated like a regular paid holiday, which is not owed until the event (e.g., Thanksgiving, July 4th) occurs. Consequently, pay for the unused holiday pay would not due upon termination.

Employers should carefully create a written policy surrounding their granting and use of floating holiday. It’s important to have your policy clearly reflect when floating holidays may be taken and what happens if the floating holidays are not taken. If floating holidays can be taken at any time, then it is important to track the employee’s accrued and unused floating holidays. Those must be paid out at the time of termination.

Lauren Sims, the author this article is an eqHR Solutions Principal Human Resources Consultant.

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