Employment: Compensatory Time Off: Some Questions and Answers

03.01.09

The Fair Labor Standards Act (“FLSA”) permits States, political subdivisions of a State, or an interstate governmental agency to compensate their employees for overtime work by granting them compensatory time off in lieu of cash payment. 29 U.S.C. § 207(o). A public employer can grant compensatory time off pursuant to a collective bargaining agreement, a memorandum of understanding, or any other agreement between the public agency and representatives of such employees. If there is no collective bargaining agreement or other memorandum of understanding, then compensatory time off may be granted pursuant to an agreement or understanding between the employer and the employee before the time the work is performed. When public employers grant compensatory time off in lieu of cash payment, it must allow at least one and one-half hours of compensatory time off for each hour of overtime worked. For purposes of the FLSA, overtime is all time in excess of 40 hours per week. If the employee’s normal work week is 37.5 hours, then the employee accrues comp time at the rate of one hour for each of the next 2.5 hours and at the rate of one and one-half hours for all hours in excess of 40.

Does the FLSA permit private employers to use compensatory time in lieu of payment of overtime wages? Despite popular belief, NO! There is some confusion on this topic because of the definition of “overtime”. Under the FLSA, “overtime” is defined as all hours worked in excess of 40 hours per work week. Private employers may not award true compensatory time off in lieu of payment for hours worked more than 40 hours per week.

How much time can an eligible public employee accumulate? If the employee works in a public safety activity, an emergency response activity, or a seasonal activity, the employee may accrue up to 480 hours of compensatory time off. If the employee performs other types of work, the employee may accrue up to 240 hours of compensatory time off. Any employee who has accumulated the maximum amount of compensatory time must be paid overtime compensation for all hours over the maximum. 29 U.S.C. § 207(o)(3)(A). If an employee transfers from a job category that permits up to 480 hours to a job that only allows 240 hours, the employee will be allowed to keep those hours in excess of 240.

When can a public employee use compensatory time off? A public employee who has requested to use his or her accrued compensatory time off must be permitted to do so within a reasonable period of time of having made the request if the use of the compensatory time does not unduly disrupt the employer’s operations. 29 U.S.C. § 207(o)(5).

Can a public employee cash in the accrued compensatory time? A public employee who has accrued compensatory time off must be paid for the unused time upon the termination of employment. The compensatory time must be paid at a rate of compensation not less than (A) the average regular rate of the last 3 years, or (B) the final regular rate – whichever is higher. 29 U.S.C. § 207(o)(4).

Can a public employer force an employee to use accrued compensatory time off? Yes. Nothing in the FLSA prohibits a public employer from compelling the use of accrued compensatory time. Furthermore, a public employer can “cash out” accrued compensatory time whenever it wishes and in its sole discretion.

There are some things a private employer can do to help control wage costs, but failing to pay overtime for hours worked in excess of 40 per week is simply not one of them.

By Michael C. Redman, mredman@dsda.com

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Rebecca D. Bullard

Rebecca D. Bullard

Rebecca represents clients primarily in labor and employment
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