Can I Use Comp Time Instead of Overtime for Employees?

Hi, welcome to Counsel Chronicles with CapEx Legal. Today we're going to talk about compensatory time, or comp time as it's often referred to. We're going to question whether or not a business can actually offer comp time. Comp time is a system where you offer time off instead of paying overtime. So for example, you have an employee and week one they work 50 hours.

In week two, they might get 10 hours of comp time and therefore they only work 30 hours. And the idea is they work 10 hours extra in week one, and instead of being paid overtime in week one, they're just going to work less in week two. And the question is, is this legal? Well, our guiding law for this is the Fair Labor Standards Act, or the FLSA.

The FLSA sets rules on minimum wage and overtime. And in section 207 of the FLSA, we have a rule that overtime is required for any hours worked over 40 hours in a week. This doesn't necessarily apply to exempt employees, and that's a little bit of a different discussion, but there are certain categories that are going to be exempt from minimum wage and overtime classifications.

The focus today is non exempt employees. So speaking to comp time specifically, the FLSA has a carve out for public entities. That means governmental entities. For non governmental entities, for regular private organizations, there is no carve out in the FLSA. And so comp time is a system that was created for governments.

Not for private companies, and a private company that tries to use comp time will not be compliant with the FLSA. Now, technically, if your employee is exempt, then there's no need for overtime at all. You can work them 50 60 70 80 hours in a week. And there's no problem, because in those exemptions, there is no overtime basis.

There is no overtime requirement, and there's no cap on hours that can be worked. That's why you see bankers in New York working, you know, 90 hour weeks, because they're going to be exempt. And so there's no qualification or function over time for those kinds of employees. In this case, if you have an exempt employee, comp time is a really nice benefit, but it's not necessary in any way.

What you're doing for those exempt employees is saying, "hey, we know we worked you a lot this week, so next week take a little bit of time off". But in the end, you can have those exempt employees working 80 hours a week, week after week, and there's no need for the comp time function, except as a nice benefit that you're offering them.

If the employee is not exempt, then you can't use comp time. There's no exemption basis for it in the FLSA, and so any use of comp time by a private company could be pretty problematic. It's important to stay in compliance here because being outside of compliance can result in a lot of legal penalties, both monetary and otherwise.

When it comes to labor and employment matters, it makes sense to talk through concepts like this with an attorney. If you don't have an attorney, feel free to reach out at Capex.Legal. Thanks for joining Council Chronicles.