How does the Nonworking Day Change for Project email notification get generated? v2012

This email gets generated when a nonworking day is added to the nonworking day section in System Manager.
The logic is: when non-working days are created for any level of workgroup, if it causes resource overbooking, an email notification should be generated.
This email notification does not get sent out if there is a calendar entry added for a vacation or day off for individual users.