Here’s a number: $287,923. That’s how much the Department of Labor recovered in back wages and liquidated damages from a business that offered comp time instead of overtime. So, what is comp time, and when is it OK to give?
What is comp time?
Comp time, comp days, or compensatory time off, is time off given to employees for working overtime hours instead of paying time-and-a-half overtime wages. Overtime hours are typically any hours an employee works beyond 40 hours in a workweek.
Nonexempt employees are entitled to overtime pay under the Fair Labor Standards Act (FLSA). So, is comp time legal under the FLSA? To answer this, let’s take a closer look at private-sector vs. public-sector businesses.
Private sector
For private-sector employers, giving comp time to nonexempt employees in lieu of overtime pay is almost always illegal.
Let’s say you have a private business. You have a nonexempt employee who works 56 hours in a workweek. Instead of paying 16 hours’ worth of overtime wages to the employee, you give them comp time the next week. In this case, you likely violated FLSA overtime laws. Instead, you should have paid the employee overtime wages for the extra 16 hours worked to remain in compliance with FLSA compensatory time off rules.
However, you can give exempt employees time off when they work extra. Exempt employees are exempt from FLSA regulations, including overtime pay.
For example, your exempt employee normally works 40 hours per week. The employee works 50 hours this week. You can allow the employee to take 10 extra hours off for the extra time worked. Keep in mind that neither overtime nor extra time off is required for exempt employees.
Public sector
According to the Department of Labor, public-sector nonexempt employees may be eligible for comp time under certain conditions.
Employees of state and local government agencies, for example, can receive comp time off at a rate of at least time-and-a-half for each overtime hour worked.
Keep in mind that there are generally limits on how much comp time hours public sector employees may accrue. Consult the Department of Labor’s website for more information.
What if employees agree to comp time?
So, what if you and your private, nonexempt employees agree to comp time instead of overtime wages? Comp time is still illegal.
According to the Department of Labor, overtime pay for nonexempt employees can’t be waived, even if both employees and employers agree.
Can’t give comp time? How to calculate overtime
You must pay overtime wages to your nonexempt employees when they work overtime hours. Again, you must pay nonexempt employees time-and-a-half for any hours worked beyond 40 in a workweek.
Let’s say you have an employee whose regular rate of pay is $20. For overtime wages, the hourly overtime rate is $30 ($20 X 1.5).
If that employee works 10 hours of overtime, you would owe the employee $300 for the extra time worked ($30 X 10).
Odds are, you have to pay overtime wages instead of granting comp time. Use Patriot Software’s payroll software to calculate overtime pay for your employees easily. Check out our software for free!
This article has been updated from its original publication date of May 3, 2017.
This is not intended as legal advice; for more information, please click here.
