Comp time (short for compensatory time) is time off given to employees in exchange for working at other times. However, many employers don’t understand that giving comp time in lieu of overtime pay is a violation of the Fair Labor Standards Act (FLSA). According to a survey by TSheets, one third of 500 private-sector employees are doing this and it’s wrong.
What the law says
If a nonexempt employee (someone subject to overtime rules) works more than 40 hours a week, he or she must be paid time-and-a-half for the overtime hours. For example, in one case, employees of a housing development in New York claimed that they were unlawfully provided overtime compensation in the form of comp time in lieu of cash for time worked in excess of 40 hours per week and the court agreed (the amount of the damages they recovered was not disclosed in the decision).
You cannot give the worker time off (comp time) as an offset for the overtime hours. This is so even if the worker would prefer to receive comp time instead of extra pay. The law does not allow a worker to make this choice.
If you fail to pay required overtime, you face steep penalties:
- Back wages and liquidated damages of twice the amount of back wages owed
- Legal fees that an employee incurs to bring a successful action against you
- Fines up to $10,000 if your action is determined to be willful, and even the possibility of criminal penalties (incarceration and fines) for repeat offenders.
Some states, such as Washington, allow private-sector employers to use comp time instead of paying for overtime if the worker agrees to it. However, state law does not override the federal FLSA, so employers using this arrangement are still in violation of federal law, and the DOL could choose to enforce the stricter federal rule.
Using comp time
It’s not illegal to use comp time in all situations. You can, for example, offer comp time to your exempt employees (those with weekly wages over a threshold amount that is currently in dispute, with a case pending in a federal court). For example, you have a manager earning $75,000 and ask her to work on a Saturday (her normal day off). You can allow her to skip Monday (her usual work day) as comp for the time she put in on the weekend.
TSheets suggests that “If you choose to offer comp time to exempt employees, it’s important to create a policy that governs how and when comp time will be offered, so the benefit is applied consistently.”
If you want to use comp time for non-exempt workers, it can’t be in lieu of payment for overtime. It can merely be time off, such as an extra personal day.
It’s essential that you understand what comp time means and make sure that your company policies align correctly. If you have questions about company policy, talk with an employment law attorney.