HR Management & Compliance

Ask the Expert: Can We Use ‘Comp Time’ once Overtime Regs Take Effect?

Question: I understand with the new FLSA regulations that “An employer may require an exempt employee to work more than 40 hours in a workweek without having to pay a premium for overtime hours.” Most of our employees are exempt, but currently we give them the option to be paid straight time for hours worked over 40, or they may “comp” the time. Many choose to comp the time (as in banking the extra hours for time to be taken off at a later date). Is this still legal for us to offer the straight time and comp time options beginning in December? We have offices in Alabama, North Carolina, and South Carolina.

comp time

Answer: Thank you for your inquiry regarding additional pay or ‘comp time’ for exempt employees who work in excess of 40 hours per week.

The Fair Labor Standards Act (FLSA) revised exemption regulations, which take effect December 1, 2016, increase the salary level for exempt employees but do not change any of the job duties’ requirements or other treatment of exempt employees.  Accordingly, the FLSA regulations continue to allow employers to provide exempt employees extra compensation without jeopardizing the exemption or violating the salary basis requirement.

Specifically, if the exempt employee is guaranteed a minimum weekly payment of $455 currently or $913 beginning December 1, he also may be paid additional compensation based on hours worked beyond the normal workweek.  The regulations allow the additional compensation to be paid on any basis, including a flat sum, bonus payment, straight-time hourly amount, time and one-half, or paid compensatory time off.  See 29 C.F.R. sec. 541.604(a).

Alabama and South Carolina do not have any specific laws or regulations addressing extra compensation for exempt employees.

A fact sheet from the North Carolina Department of Labor, available online at http://www.nclabor.com/wh/faqs.pdf, indicates compensatory time off is okay for exempt employees and states: “A business in the private sector can give comp time to its bona fide exempt employees since these employees do not have to be paid time and one-half overtime pay. Such a comp time policy may be hour-for-hour but must be in writing as with any other wage benefit policy.”

Remember, though, compensatory time off generally should not be paid as an alternative to overtime pay for nonexempt, hourly employees in the private sector.  (Certain public employers may grant nonexempt employees compensatory time off in place of overtime payments in compliance with the FLSA.  See 29 U.S.C. sec. 207(o).)