Comp time―not an option for private employers

by Reggie Gay

Say you have a nonexempt salaried employee who will be working an extra six hours each week for additional training for her position. The extra hours will result in overtime hours each week. However, the employee is requesting comp time in lieu of overtime pay. Is it OK to let her track the hours she works (including the training time) and ask her to sign a form indicating her desire to waive overtime pay in lieu of comp time? If so, should the comp time be given to her at time and a half? 

Comp time, training time, and overtime

One of the most misunderstood and misapplied rules of the Fair Labor Standards Act (FLSA) deals with overtime and comp time. Often, employees would rather receive comp time than overtime pay. In fact, they specifically ask for it. Further, questions frequently arise about whether an employer is responsible for an employee’s training time.

To begin the analysis, you first should determine whether the training time is compensable under the FLSA. For private employers, time spent attending training or educational programs is not working time if (1) attendance occurs outside the employer’s regular hours, (2) attendance is voluntary, (3) the employee does no productive work while in attendance, and (4) the program, lecture, or meeting isn’t directly related to the employee’s job. All four factors must be met for the time to be excluded from work time. Also, training that is required by the state (as opposed to the employer) and not tailored to meet the particular needs of the employer normally doesn’t need to be counted as compensable work hours under the FLSA.

Overtime for private employers

Once you determine whether the training time is compensable, you must count all hours worked, including any compensable training time. If the hours exceed 40 in a single workweek, you must determine how the overtime will be paid. Simply put, comp time cannot be used for nonexempt employees of private employers. In other words, private employers are not permitted to allow employees to carry overtime hours worked in one workweek to a subsequent workweek by giving them paid time off. That is true even if comp time is authorized or requested by the employee.

You may, however, rearrange an employee’s schedule in the same workweek to avoid overtime. In general, comp time policies for private employers may be adopted voluntarily for use with salaried exempt employees. However, comp time typically is permitted for public-sector nonexempt employees. For public-sector nonexempt employees, 1 1/2 hours of paid time off must be provided for each overtime hour worked.

Calculating overtime

Finally, the overtime rate must be calculated. Under the FLSA, the overtime rate is 1 1/2 times the covered nonexempt employee’s regular rate of pay. When nonexempt employees are paid by the hour, the calculation is straightforward, but when they are paid on a salary or commission basis, the calculation can be complicated. In those situations, the regular rate normally is determined by dividing the employee’s total regular compensation for the week by the total number of hours worked. Calculations can be tricky when employees receive commissions, bonuses, or other out-of-the-ordinary payments, so be sure you know how to properly calculate the rate in those circumstances.

Thus, to answer your question, you are not permitted to use comp time for a nonexempt employee who works more than 40 hours in a single workweek. That is true even if the employee requests or expresses a desire to waive overtime pay in lieu of comp time. Only public-sector employers are allowed to provide comp time to nonexempt employees. Even then, the comp time must be paid at time and a half for all hours worked over 40 hours in a single workweek.

As a final point, because the qualification for overtime pay and the calculation of the rate can be tricky, you should discuss the matter with your employment counsel before administering your system if you have an unusual situation. Failure to pay overtime or maintaining a comp time system that’s found to be invalid can subject you to the cash value of all hours owed plus additional penalties and damages.

A change brewing in D.C.?

Currently,the Working Families Flexibility Act is working its way through the House of Representatives, getting approval from the House Education and Workforce Committee on April 17.  The legislation was introduced by Martha Roby (R-AL) and would allow private-sector employers to offer hourly employees the choice of compensatory time off or pay for overtime hours worked. Under the Act, employees:

• Would have to work a minimum 1,000 hours within the last 12 months to be eligible for comp time;

• Could accrue up to 160 hours of comp time a year and to “cash out” unused comp time within specified periods of time; and

• Would be permitted to use the accrued comp time within a reasonable time after request so long as it doesn’t unduly disrupt the employer’s operations.

Under the Act, employers:

• Are permitted to offer a comp time program only if it is part of a collective bargaining agreement or if the employee voluntarily agrees to it in writing prior to the performance of work; and

• Must cash out unused comp time at the higher of the regular rate at which the time was earned or the final regular rate.

Recently, Michael P. Aitken, Vice President of SHRM Government Affairs, spoke to the Employers Counsel Network about the Act. He noted that SHRM is leading the effort on the Act and that he expects the bill to be considered by the House in early May.

Reggie Gay is a shareholder with McNair Law Firm, PA, in Columbia, South Carolina, and a member of the Employers Counsel Network. His primary areas of practice include labor and employment law, workers’ compensation, litigation, health care, and appellate advocacy. Reggie represents business and governmental clients by providing consultation on employment and other matters, conducting preventive training, and litigating in both federal and state courts. You can contact him at rgay@mcnair.net.