The Rules on Comp Time How to determine whether you can give your employees comp time instead of overtime

Q: Can a private employer require its employees to take "comp time" rather than paying them overtime?

A: The Fair Labor Standards Act defines compensatory time off as paid time away from the job that is earned and accrued by an employee in lieu of a cash payment for overtime compensation, at the rate of no less than one and one-half hours of compensatory time for each hour of overtime worked. Under the act, only government agencies may legally allow their nonexempt employees time off in place of wages; for the most part, private employers are not eligible to use comp time in place of overtime.

However, the act does allow employees of private employers to earn and accrue time off in lieu of compensation in certain circumstances. This type of compensatory time is not traditional comp time, as defined above, but is considered "other" compensatory time.

For example, a state law may provide comp time for all employees who work more than 35 hours in a workweek. By comparison, the act requires that only hours worked in excess of 40 in a workweek are overtime hours that must be compensated at one and one-half times the regular rate of pay. Therefore, in this situation, comp time may be granted for work done between 35 and 40 hours as "other" compensatory time.

Another example of "other" compensatory time is when a collective bargaining agreement grants comp time to employees for hours worked in excess of eight in a day. The act does not consider hours worked in excess of eight in a day as overtime. Therefore, in this situation, allowing comp time for the hours worked over eight in a day would not be prohibited by the act, provided that the employee did not work more than 40 hours for the week.

Employers must check state and local laws for any such exceptions--and any restrictions--regarding "other" comp time. We note that this is a specific (and often confusing) distinction, and therefore employers should be very cautious in applying it.

Employers and employees should also keep in mind, though, that if an employee is not covered by the act or is exempt from its overtime provisions, a comp time agreement would be permissible, as long as it does not affect the salary basis of the employee's compensation. Be aware that such agreements can be risky, as some courts have questioned whether a salaried employee who is also paid comp time is really an exempt employee. Therefore, if an employer and a salaried exempt employee decide that they want to enter into an agreement for comp time, counsel should be consulted to ensure compliance with the act.

Note: The information in this column is provided by the author, not Entrepreneur.com. All answers are general in nature, not legal advice and not warranted or guaranteed. Readers are cautioned not to rely on this information. Because laws change over time and in different jurisdictions, it is imperative that you consult an attorney in your area regarding legal matters and an accountant regarding tax matters.

Larry Rosenfeld is co-chair of the national labor and employment practice of the law firm Greenberg Traurig LLP. A frequent writer and lecturer on employment law topics, Rosenfeld is experienced in the areas of federal laws pertaining to employment issues, EEOC, ADA, termination matters, employment liability and the Fair Labor Standards Act.