Employers Beware: Comp Time Could Land You in Hot Water

Q4intelligence on Jul 25, 2019 3:00:00 AM

Employees are often more than willing to put in extra hours to help accomplish a specific team or company goal. Participating in special events, trade shows, product launches, and other occasional high-intensity activities can be fun and rewarding for motivated staff members.

In these circumstances, it can be tempting to get creative when compensating helpful employees for this additional time. It can also be a violation of the Fair Labor Standards Act.

What is comp time?

Compensatory (comp) time is sometimes offered to non-exempt employees in lieu of overtime pay. Rather than paying employees time and a half for those extra hours, a company or supervisor might offer additional paid time off to make up for the additional time worked.

Here’s an example: An employee works 48 hours one week as a result of helping out with a company special event. In return, their employer offers to give them an additional paid day off at some other time. Everybody’s happy, right?

Not quite.

While this may sound like a great idea to many employers and employees, it’s usually illegal.

When is comp time legal?

If you’re dealing with public sector employees under a union contract, you may be able to provide comp time in a manner that doesn’t violate the FLSA. Here are a few things to keep in mind:

  • The comp time strategy must be spelled out and agreed to before the extra hours are worked, not after the fact.
  • Employees can’t be required to work mandatory comp time on a regular basis.
  • Comp time must be paid at the same rate as overtime pay, meaning they should receive one and a half hours of comp time for every additional hour worked.

Some states have passed laws that allow private employers to provide comp time instead of overtime. If you’re in one of them, you may be in the clear. Just keep in mind that these laws can be complex and difficult to interpret. Make sure you have a clear understanding of what you can and can’t do. Working with an employment law expert when developing your compensatory time program is always a good idea.

When not to use comp time

If you’re a “better safe than sorry” kind of person, you may want to toss the idea of comp time out the window altogether.

Focusing on a clear compensation system that includes accurate time keeping, fastidious record keeping, and careful attention to hours worked and overtime pay calculations might be the best solution for your business and your employees.

If your employees are putting in extra hours, here are few things to keep in mind:

  • Workers can’t volunteer their time or waive their right to overtime pay. Businesses are required to pay overtime to eligible employees, even if that employee wants to work unpaid.
  • Non-exempt, overtime-eligible employees must be paid overtime for additional hours worked, even if the overtime was unauthorized or prohibited.
  • Simply paying overtime isn’t enough to keep you in compliance. Overtime must be paid at the correct rate. Compensating employees for overtime incorrectly is also a wage and hour violation.
  • Overtime can be mandatory, but comp time cannot.
  • Private sector, non-exempt employees who are covered by the FLSA must be paid at time and a half for all overtime hours worked. Offering them comp time for extra hours worked is a violation of federal law. (Unless your state says differently.)
  • Exempt employees are not entitled to overtime pay. However, exempt employees must be classified correctly according to their job role, duties, and salary. Classifying someone as exempt to avoid overtime pay is a big no-no.

it’s not uncommon for employers to do everything they can to avoid paying overtime, but sometimes it isn’t a matter of ill intent or gaming the system. Sometimes, your employees really do just want to go above and beyond, working extra hours in the process. And you may want to let them.

Unfortunately, those helpful staff members may not realize they are actually putting the company in jeopardy— and you might not realize you’re in danger of non-compliance.

Other overtime hazards

Overtime isn’t just about money or being in compliance. Sometimes, it’s about how much work there is and who may or may not be willing to do it.

Even if you are following all the rules, classifying your employees correctly, and accurately paying people for all of their time, there are a couple of reasons you may want to keep overtime hours in check.

Expecting your exempt employees to work more than their fair share on a regular basis isn’t a good employee retention strategy. Employee burnout is real. And so is math. If your exempt employees get to a point where they’re calculating out their hourly wage, will that salary you’re offering still seem appealing? 

Some employers pay out loads of overtime as if it’s a good thing. But be careful about whether those additional hours are optional or mandatory. Not every hardworking employee thinks being paid time and a half is worth missing every one of their kid’s soccer games.

Finding that sweet spot where work hours, employer compliance, and employee satisfaction all come together won’t just keep you out of trouble. It will make your business healthier and your team happier. 

 

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Photo by Carolyn Franks

Topics: HR Strategy, HR Admin