Even if you have only worked in HR for a short time, you know that a unique language is used. There are countless acronyms and special lingo used throughout the day. This language can sometimes get employers into trouble when the regular English definition and the legal definition have conflicting meanings. One such example of this is the use of “comp time.”
According to the Oxford definition, compensatory time, or “comp time,” is “an arrangement by which eligible employees are entitled to time off in lieu of overtime pay.” The key word here is “eligible.”
According to the U.S. Department of Labor (DOL), “The use of comp time instead of overtime is limited by Section 7(o) of the FLSA [Fair Labor Standards Act] to a public agency that is a state, a political subdivision of a state, or an interstate governmental agency.” For this reason, compensatory time has a legal meaning and should not be used synonymously with other time off benefits or workplace flexibility programs.
With this said, if your organization is a public employer, then it may be permissible to provide comp time. Employers Council’s Government Employer Overtime handbook, which is available to members, further discusses this matter and, in part, states, “Because of the significant budgetary considerations of overtime, Congress created special rules allowing public employers to pay “compensatory time” in lieu of overtime and to dock exempt employees if they work fewer hours than scheduled in a workweek by their own choice, so long as there is a written policy.”
What the FLSA Says
If your organization is a private employer, then it is not permissible under the FLSA to provide comp time. Even mentioning comp time in front of the DOL or the Colorado Department of Labor and Employment (CDLE) might elicit an investigation into the organization’s overtime practices.
For a position to be exempt from minimum wage and overtime requirements, it must pass both the Duties Test and the Salary Basis Test. For exempt employees, the FLSA’s salary basis test requires “employers to pay exempt employees a predetermined amount on a weekly basis regardless of the quality or quantity of work performed or the actual number of hours worked.” Outside of limited circumstances, it is a violation of the FLSA to reduce an exempt employee’s weekly salary if they work fewer than 40 hours. Furthermore, exempt employees do not receive overtime if they work more than 40 hours.
On the other hand, for non-exempt employees, the FLSA makes clear that employees must be paid overtime at a rate not less than 1.5 times their regular rate for all time worked in excess of 40 hours in a workweek. Employers must also follow state overtime laws.
Common Scenarios
Frequently, Employers Council’s HR consultants and attorneys are contacted by private employers regarding this matter. Questions may sound something like the following:
- Can my organization provide comp time?
- We have employees who worked more than 40 hours one week and want to reduce the time they work the following week. Can we do that?
- An exempt employee has been tracking their time over the past few months, and they have worked an extra 20 hours. They want to use this time to extend their vacation. Can they do that?
- Due to the type of work we do, sometimes employees work more than 40 hours a week. We want to give them extra time off to make up for the extra hours worked. How can we do that?
As indicated above, the short answer here is no, private employers cannot provide comp time, but the conversation doesn’t need to end here. In fact, the questions above can be approached from two perspectives: compliance and workplace flexibility.
Comp Time vs. Flexibility
From a compliance perspective, employers must pay employees in accordance with state and federal law; there is no legal way around this.
However, private employers sometimes confuse “comp time” with flexibility. An employer may allow a non-exempt employee to leave early within the workweek to avoid overtime. Instead of calling this comp time, employers should refer to this as flexibility. Both public and private employers may offer and should consider workplace flexibility.
Workplace flexibility can assist employers in balancing business needs with employee needs. Flexibility should be available to all employees regardless of how their position is classified. Furthermore, because exempt employees are paid on a salary basis and not based on the number of hours worked, private employers are cautioned regarding programs, regardless of what they are called (i.e., flextime, comp time, etc.), that provide an hour for an hour. (This means that for every hour over 40 worked, the employee can take an hour off.)
The demand for workplace flexibility is growing and has many benefits. To learn more about how to customize a workplace flexibility strategy for your organization, please click here.
Going forward, when faced with questions regarding comp time, be sure to ask yourself, “What am I really trying to solve for?” Is it compliance or workplace flexibility? The answer to this question can help you navigate the appropriate course of action.
Employers Council members have access to whitepapers and sample handbook policies that offer further guidance on overtime requirements. We also offer a training course titled Wage and Hour Law: Avoiding Costly Mistakes to help participants avoid common FLSA pitfalls. Members get a discounted rate. Click here to learn how to become a member.