HR Management & Compliance

Can Public Employers Require Comp Time Off Instead of Overtime Pay?

I work in the human
resources department of a California
municipality. One of our supervisors is insisting that we, as a public
employer, have the right to force employees to take compensatory time off in
place of cash payments for overtime hours worked. Can we do this?

 

– Anne in Southern California

 


The HR Management & Compliance Report: How To Comply with California Wage & Hour Law, explains everything you need to know to stay in compliance with the state’s complex and ever-changing rules, laws, and regulations in this area. Coverage on bonuses, meal and rest breaks, overtime, alternative workweeks, final paychecks, and more.


Compensatory time off
(CTO) is when employers provide time off, compensated at the employee’s regular
pay rate, instead of overtime pay when an employee works excess hours.
Determining that CTO is permissible depends on many factors, and key among them
is whether the employee is exempt or nonexempt. If exempt, the employee
typically has no right to overtime pay as a matter of law, so his or her CTO
rights depend on the employer’s policies or an employment agreement’s terms.

 

If the employee is
nonexempt, the federal Fair Labor Standards Act imposes strict conditions on CTO.
Government employers can grant CTO instead of overtime pay (when an employee
works more than 40 hours in a workweek), provided the CTO is given at the rate
of 1
1/2 hours for each overtime hour
worked. Plus, the CTO arrangement must be in place—either in a collective
bargaining agreement or other agreement—before the employee performs the
overtime work that leads to the CTO. The FLSA also imposes caps (typically 240
hours) on how much CTO a nonexempt employee can accrue and requires that
accrued and unused CTO must be paid out on termination.

 

In the private sector,
the CTO rules are even more restrictive for nonexempt employees. California rules permit
CTO only for employees covered by certain Wage Orders, and even then a host of detailed
conditions must be followed. Federal regulations bar CTO as payment for these
employees for hours worked over 40 in a workweek.