Can I Require Employees to Use PTO During a Business Shutdown or Holiday Closure?
Quick Answer: In most states, yes, you can require employees to use accrued PTO during a business shutdown, but the rules differ for exempt and non-exempt employees, and several states add additional requirements. Here's what you need to know.
Can you require employees to use PTO during a business shutdown or holiday closure? It's one of the most common questions small business owners ask this time of year, and the answer depends on your state, your PTO policy, and the employment classification of the employees involved.. Many small businesses close for a week during the holidays, during a slow season, or for an unexpected reason. The question that always follows: can you require employees to use their accrued PTO during this period, or do you have to pay them without touching their leave balances?
The answer depends on your state, your PTO policy, and the employment classification of the employees in question. If you don’t already have a written policy in place, this is one of the many policies included in our Small Business Employee Handbook Template.
For Non-Exempt (Hourly) Employees
Non-exempt employees are only required to be paid for hours actually worked. If your business shuts down and a non-exempt employee does not work, you generally do not have to pay them for those days, with or without PTO.
You can require non-exempt employees to use accrued PTO during a shutdown if your policy permits it. If they have no accrued PTO, they simply do not receive pay for the shutdown days. Of course, you could always choose to pay them anyway.
For Exempt (Salaried) Employees
This is where it gets more complicated. Exempt employees must generally receive their full weekly salary in any week in which they perform any work. If you shut down mid-week, say, Wednesday through Friday of a holiday week, and the employee worked Monday and Tuesday, you generally must pay their full salary for that week.
The exception: you can require exempt employees to use PTO to cover the shutdown days. The DOL has affirmed that requiring exempt employees to use accrued leave during office closures does not violate the salary basis test, meaning it does not destroy their exempt status. If the employee has insufficient PTO to cover the shutdown days, you have a choice: pay them their full salary anyway, or not. But if you dock their pay for a partial week shutdown, you risk converting them to non-exempt status for that period. That could open up a can of worms that may not be worth it. For a broader look at how PTO policies should be structured to avoid these situations, see PTO Policy: A Small Business Guide.
For a full-week shutdown where no work is performed, you can dock exempt employee pay without jeopardizing their exempt status, or require them to use PTO.
State Law Variations
Several states add complexity:
• In California, accrued PTO is a vested wage. You can require employees to use it during a shutdown, but you cannot require them to forfeit it if they do not have enough to cover the closure period.
• Some states require advance notice before mandating PTO use. Check whether your state has a minimum notice requirement.
• States with mandatory paid sick leave laws may restrict which leave balances can be applied to a business shutdown. Sick leave may need to remain available for its intended purpose.
What Your Policy Should Say
The cleanest solution is a PTO policy in your employee handbook that explicitly addresses company shutdowns: whether employees are required to use PTO during closures, how much advance notice the company will provide before a mandatory shutdown, what happens if an employee does not have sufficient PTO to cover the closure period, and whether certain leave types (sick leave) are excluded from mandatory shutdown use.
A policy that is silent on this creates ambiguity, and ambiguity in PTO situations tends to favor the employee in a dispute.
The Practical Approach
Most small businesses that close for the holidays handle it one of three ways: they pay employees for the closure as a company benefit and do not touch PTO balances; they require PTO use and communicate this clearly in advance; or they offer the closure as unpaid time for hourly employees and require PTO use for salaried employees.
All three are legitimate. The key is that whatever approach you take, it is written in your policy, communicated to employees before the closure, and applied consistently. For more on the foundational policies that support consistent decision-making, see HR Policies Every Small Business Needs.
Frequently Asked Questions
Can I require employees to use PTO during a holiday shutdown? In most states, yes. Employers can require employees to use accrued PTO during a planned business closure, including holiday shutdowns, as long as the policy is written, communicated in advance, and applied consistently. Some states have advance notice requirements, so check your state's specific rules before mandating PTO use.
What if an employee doesn't have enough PTO to cover the shutdown? It depends on the employee's classification. For non-exempt hourly employees, you are generally not required to pay them for days not worked. They simply go unpaid for any days not covered by PTO. For exempt salaried employees, docking pay for a partial week shutdown risks jeopardizing their exempt status. For a full-week shutdown where no work is performed, you can dock exempt employee pay without that risk.
Can I require exempt salaried employees to use PTO during a closure? Yes. The Department of Labor has confirmed that requiring exempt employees to use accrued PTO during an office closure does not violate the salary basis test and does not affect their exempt status. This is one of the cleanest ways to handle a shutdown for salaried employees.
Do I have to give employees advance notice before requiring PTO use? It depends on your state. Some states require a minimum notice period before an employer can mandate PTO use. Even where it is not legally required, best practice is to communicate a mandatory shutdown and PTO requirement as early as possible, ideally in your written PTO policy so employees know the rule before the situation arises.
Does this apply to sick leave as well as PTO? Not necessarily. In states with mandatory paid sick leave laws, sick leave must generally remain available for its intended purpose (illness, medical appointments, and qualifying family care). You typically cannot require employees to use sick leave balances to cover a business shutdown. Check your state's sick leave law before applying shutdown rules to sick leave balances.
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