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 resource 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.” Click here to learn more about the limits of comp time for public employers and to review Employers Council’s sample policies on this topic.
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.” Permissible deductions can be found beginning on page two of the Salary Basis Test whitepaper linked above. However, outside of these 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. Employers Council members that are multi-state employers can access the CCH/ Multi-state tool for state overtime requirements and the CCH Multi-state Chart Builder to compare state laws.
Common Scenarios
Frequently, our HR consultants and attorneys are contacted by private employers regarding this matter. Questions may sound something like the following:
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. (Meaning that for every hour over 40 worked, the employee can take an hour off.)
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.
If you are an Enterprise or Consulting member and have any questions, please contact Employers Council for assistance at info@employerscouncil.org. Our attorneys are available to discuss any wage/hour concerns you may have, and our HR consultants will be happy to talk with you regarding workplace flexibility.