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Do I give contractors paid time off or overtime pay on holidays?

The applicable federal law is the Fair Labor Standards Act (FLSA), which establishes minimum wages and overtime pay. It does not, however, cover independent contractors. As a result, independent contractors generally receive the compensation and benefits outlined in their Independent Contractor Agreement. This usually does not include paid time off, or holiday pay.

If you are using a staffing agency, or your independent contractors are employees of another company, however, they may be eligible for paid time off and overtime through their agency or employer. Depending on your agreement with the agency or employer, those workers may or may not be required to work holidays.

How do I know who is a contractor and who is an employee?

From a human resources perspective, it is a critical question whether the worker is an employee or an independent contractor. This question, unfortunately, is not always easy to answer. Contractors may control their own workload and hours, and show up when necessary to do what they are contracted to do, while employees are required to show up at a certain place and time to perform certain duties essential to the business.

Contractors are not entitled to employer-provided benefits regular employees receive, so it is in an employer's self-interest to classify a worker as a contractor whenever possible. This can lead to an employer misclassifying an individual as a contractor when that worker is really an employee. This can be a costly mistake.

The Supreme Court has weighed in on the FLSA and its definitions of a contractor and an employee on multiple occasions. Here are some indicators to tell the difference:

  • How integral are the worker's services to the business? 
  • Does the worker in question supervise any employees?
  • How permanent is the relationship? 
  • How much does the worker invest in their own equipment? 
  • How much control does the business exert over the worker? 
  • How much opportunity for profit or loss does the worker have?
  • Does the worker have other clients? 

No single factor determines a person's work status. Courts will weigh all the factors in an "economic reality" test. The more control a business has over the work being performed, the more likely it is that the worker will be classified as an employee, particularly if the work being done is part of the business's offerings. 

What are the federally recognized holidays?

The following days are federally recognized national holidays:

  • New Year's Day.
  • Birthday of Martin Luther King Jr.
  • Presidents Day.
  • Memorial Day.
  • Juneteenth National Independence Day.
  • Independence Day.
  • Labor Day.
  • Columbus Day.
  • Veterans Day.
  • Thanksgiving Day.
  • Christmas Day.

Although these holidays apply to federal employees, many private employers also follow this schedule and provide time off for their workers.

Do any state laws require private employers to give contractors holiday time off or overtime pay?

Few, if any, states require private employers to pay contractors overtime or paid time off on holidays. Rhode Island and Massachusetts require private employers to offer paid time off for some national holidays, but these laws do not apply to contractors.

In California, Assembly Bill 5 (AB5) requires companies hiring independent contractors to reclassify these individuals as employees if they meet the criteria of the "ABC Test." Under this test, a worker is an employee unless all three of the following conditions apply: 

  • The worker must be free to work without being under the direction or control of the company. 
  • The worker must be doing work outside the usual course of the company's business. 
  • The worker must be doing work consistent with their regularly established occupation or business. 

California contractors who become employees under AB5 are presumably eligible for employee benefits, when required or offered, including holiday time off or overtime pay.

How do federal holidays affect government contractors?

Two federal laws can affect whether a contractor working on a federal government project must provide holiday overtime pay to its workers.

Davis-Bacon and Related Acts

The Davis-Bacon and Related Acts apply to contractors and subcontractors who work on projects that receive federal funding or assistance of more than $2,000. The contract or subcontract must be for construction, alteration, or repair of a public building or public work. 

If the Davis-Bacon and Related Acts apply, then contractors and subcontractors must pay their mechanics and laborers who work on the project site wages and fringe benefits that are at least as good as those for other, similar projects in the same area. If the prevailing fringe benefits include additional pay for hours worked on holidays, then the contractors and subcontractors are obligated to provide the same to their mechanics and laborers.

McNamara-O'Hara Service Contract Act

The McNamara-O'Hara Service Contract Act applies to contractors and subcontractors who work on federal prime contracts with a value of more than $2.500. Under this law, contractors and subcontractors must pay service employees wages and fringe benefits at least the same as those prevailing in the project locality. Also, if a prior contractor's contract on the project included a collective bargaining agreement, then the new contract must pay no less than the old contract's rates. 

The McNamara-O'Hara Service Contract Act does not apply to the following kinds of contracts:

  • Construction contracts.
  • Contracts to supply or manufacture materials, supplies, or articles for the federal government.
  • Transportation contracts for personnel and freight.
  • Oil or gas pipeline projects that have published tariff rates.
  • Communications contracts subject to the Communications Act of 1934.
  • Direct services contracts between individuals and a Federal agency.
  • Public utility contracts.
  • Postal contract station operating agreements.
  • Services provided outside of the United States.

There may be similar provisions, and additional reporting requirements, to be aware of when working on projects funded by state or local governments as well. 

Employment laws can be complicated, with big consequences for employers if they are out of compliance. Make sure you have access to an employment lawyer who can answer your questions and help you navigate these issues with confidence. If you have questions about contractors, time off, and holiday pay, reach out to a Rocket Lawyer network attorney for affordable legal advice. 

This article contains general legal information and does not contain legal advice. Rocket Lawyer is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.

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