Project will not flag a resource as overallocated because there is non-working time in his/her calendar. If the task is Fixed Work or Fixed Units, it will simply move the work for the assigned resource. If there are multiple resources assigned the assignments are scheduled during working time for each resource.

However, if the task is fixed duration, the story is slightly different. If the resource has non-working time s/he will simply have less work scheduled - assuming you changed the working time BEFORE assigning them to a Fixed Duration task.

For example: a task starting on April 13, 10 days duration. Fixed Duration. Task is scheduled to finish on April 24.

I have four resources: Mary, Mike, Pete, Sue. Pete is on vacation from April 21-24. I assign all four resources to the task. Mary, Mike, and Sue are all scheduled for 80 hours of work each. Pete is scheduled for 48 hours - the six working days in his schedule that fall between the 13 and 24.

Take a look at the Task Usage view to really see when each resource is working. I do see Pete's shortened work schedule in the Team Planner view, but by default the task bars extend through nonworking time. Try changing the Nonworking time display to a darker color and you should be able to see the non-working time for each resource.