Should you pay for the time a non-exempt employee spends at your annual holiday party?
Generally speaking, voluntary attendance at a holiday party or community event (e.g., charitable dinner, ribbon cutting) is not compensable working time, but there certainly are situations that could make an employee’s time compensable.
This concern only applies to non-exempt workers, since employers are required to track their hours and pay them overtime for all hours worked over 40 in one workweek. Employers do not need to pay exempt employees additional compensation for attendance at holiday parties or community events.
When “encouraging” community work turns into “requiring” community work
If an employer requires non-exempt employees to attend a holiday party or community event, the employer must treat that time as working time, track it and compensate the employee for that time. If the event is entirely voluntary, then the employer does not have to pay the employee for his or her time in attendance.
Is attendance is implicitly required or “strongly encouraged?”
Often, employees feel compelled to attend because there is an implied understanding that if they don’t, they might suffer some adverse consequence, such as losing a promotion or raise.
The Lululemon Case illustrates when encouragement may cross the line into mandatory work.
Lululemon is a company that makes yoga apparel. Lululemon is currently facing a collective action including potentially hundreds of employees (mainly in New York). These employees were allegedly expected to take yoga classes at local studios while wearing company clothing and encouraging studio instructors to wear Lululemon apparel. The employees in the lawsuit claim this was supposedly part of Lululemon’s marketing strategy and the company paid for employees’ studio registration fees.
Essentially, the employees claim Lululemon required community work that benefited the company’s brand, and if employees did not comply, they could be disciplined up to and including termination. The employees are suing for unpaid off-the-clock work and unpaid overtime for weeks in which they “sweat in the community” for their employer.
Lululemon is fighting these allegations, and there is no decision yet, but this case is a good example of where employer “encouragement” may cross the line into a mandatory activity and have unintended consequences. If employees are encouraged to market for the company or wear company clothing at community events, employers should really consider whether an employee’s attendance at such events is truly “voluntary” or should be compensable.
Unexpected work at the event
If attendance at the event is entirely voluntary, but employees actually work while there, such as being asked to staff a booth, hand out fliers, or even put on a costume for the company’s guests, then employers are likely required to pay employees for that time.
Take for instance an example where an employer has a booth at 5k race. A non-exempt employee runs the race and stops by to say “hi” to her coworkers at the booth. One of the coworkers has to leave for an emergency and asks the runner-employee to man the booth for an hour.
Another unexpected work situation could happen if an employer has a holiday party and asks employees to stay after and put tables and chairs away.
In both of these examples, while the event invitation was clearly voluntary, the employees arguably performed some work that could count as payable time.
Best practices for inviting employees to voluntary events
Employers should review their off-hours activities to determine whether they are encouraging required community work. Employers should also clearly communicate expectations of holiday parties and community events to employees in writing.