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Just Say No to Comp Time

by Kara Shea

I hear it all the time: Our employees want comp time; our employees like comp time. Why can’t we give them comp time? And time and time again, I have to deliver the unpleasant news: In most cases, even if your employees love comp time like they love ice cream sundaes and casual Fridays, the practice is illegal under the Fair Labor Standards Act (FLSA).

Simply put, private employers aren’t permitted to offer nonexempt employees compensatory time (comp time) off instead of paying overtime. In most states, you may rearrange an employee’s hours within the same workweek to avoid overtime, but other than that, as much as I’d like to help you out, there’s simply no wiggle room on this one.

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Here are some examples taken from real-life questions I’ve received from clients (the names have been changed to protect the not-so-innocent) that demonstrate what I’m talking about.

Example 1: Jim, a full-time hourly warehouse worker, typically works a 38-hour weekly schedule, Monday through Friday. For payroll purposes, the seven-day workweek for all warehouse employees runs from 12:01 a.m. Sunday through midnight the following Saturday. Because of the arrival of a particularly large shipment of inventory, Jim has already worked 38 hours by the end of the day on Thursday. Things have slowed down toward the end of the week. Jim’s supervisor, anxious to avoid overtime, tells him not to come in on Friday. Is that OK?

Example 2: Let’s say the warehouse stays busy all week, and Jim logs 48 hours by the end of the day Friday. Because next week looks to be slow, his supervisor tells him that if he wants, he can have a long weekend, taking Monday off with pay instead of receiving eight hours of overtime pay for the week. Is that OK?

Example 3: On Friday afternoon of the week he works 48 hours, Jim approaches his supervisor, saying he needs to take off a Friday four weeks from now to attend a wedding. He asks if the company can hold his eight hours of overtime and give him a future paid day off instead so he won’t lose any pay the week of the wedding. He offers to sign a note stating that he agrees to the arrangement. How about that?

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Here are the answers, printed right-side up for your convenience: Unless some other agreement applies, the employer is permitted to order Jim to take a day off during the same week to avoid overtime. But the arrangements described in examples 2 and 3 are illegal, even if Jim agrees to them.

On a related note, I’m often asked if it’s OK to give comp time so long as the employee takes the time during the same pay period (usually the following week). There’s absolutely no support in the FLSA or its regulations for that practice. As a practical matter, you might be less likely to get dinged if you permit comp time carryover only for short periods, but it’s still an avoidance of weekly overtime and therefore a violation of the law. (There are limited exceptions to that rule for certain kinds of emergency and medical personnel.)

One last point: Remember that comp-time systems are illegal only for non-exempt employees. Because you don’t have to pay exempt employees overtime to begin with, comp time arrangements with them are usually fine, so long as they don’t interfere with the salaried basis of pay if that’s a requirement for their particular exemption.

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There’s no need for the public employers reading this to panic and start cashing out your comp-time banks. You public-sector folks are a bit different. Public agencies, such as local, state, and federal governments, are permitted to implement comp-time systems under strict statutory requirements.

If you haven’t reviewed your comp-time system lately, you might want to check with an experienced employment attorney to make sure you’re in compliance. If you’re not, you’re in the same boat as the rest of the comp-time violators, and you could owe your employees a lot of back pay.

So, bottom line: Private employers, by all means, call your congressman and lobby for a comp-time amendment to the FLSA. I’m with you, and I promise to let you know if the law changes. Until then, just say no to comp time.

Kara Shea is a member of Miller & Martin in Nashville. She can be reached at (615) 744-8418.