Back to Menu
    The Vault lock icon
    Level 2
    Classified Full Access

    For the business owner ready to implement key strategies and concepts with the right guidance and support.

    Comp Time Instead of Overtime Pay a Possibility
    The Vault

    Comp Time Instead of Overtime Pay a Possibility

    April 2017

    We’re all pretty familiar with overtime law: If a non-exempt employee works more than 40 hours in a week (or more than eight hours in one day, in CA), you have to pay that employee time-and-a-half for the extra hours.  So an employee who works 45 hours this week gets 40 hours straight time pay and 5 hours overtime pay.  Sounds familiar, right?  But what if there was another option?

    Representatives in the House are now actively considering the “Working Families Flexibility Act of 2017”, which would amend the federal Fair Labor Standards Act to permit private-sector employees to offer comp time in lieu of monetary overtime pay.  So that same employee who just worked 45 hours this week could opt to work less hours next week (see below to determine how much time) and be paid 40 hours straight time for both weeks, essentially forfeiting the extra money in exchange for some extra time off.  Currently, taking comp time in exchange for overtime pay is illegal in the private sector.  

    There are four main points to the bill:

    1. Employer and employee must agree to the deal.  As a business owner, you cannot just decide to stop paying overtime and offer comp time.  Both sides have to agree, as the default regulation is overtime pay.  In addition, the employee must have worked at least 1,000 hours before to be eligible for comp time.  
    2. Participating employees would receive at least 1.5 hours of compensatory time off for each hour worked over 40 in a workweek, up to a maximum of 160 hours off.  Using the example above, an employee who works 45 hours this week would be entitled to 7.5 hours of comp time (5 hours extra work x 1.5).  
    3. If an employee asks to use his or her accrued comp time, the employer must grant the request "within a reasonable period" after the request, as long as doing so will not "unduly disrupt the operations of the employer."

      Any comp time not taken by the end of the calendar year (or another year designated by the employer) would be paid out at the employee's regular rate when the comp time was accrued or at the employee's current regular rate, whichever is higher. The payout would have to be made no later than 31 days after the end of the "comp time year." If employment terminates voluntarily or involuntarily, the employer is required to pay out all accrued comp time to the employee.
    4. It’s changeable. If the employer gives 30 days' notice to the employee, it can pay out any accrued comp time that exceeds 80 hours for the year. The employer can discontinue comp time whenever it wants by providing 30 days' notice to the employees.

    Flexibility is always high on the list of things employees and employers want, so this seems like a win for both sides. Should it pass, I’m confident we’ll see resulting extensive, related recordkeeping requirements set forth by Department of Labor.  But we’ll cross that bridge when we come to it.  For now, keep your eye on this bill, as it has tremendous potential to change the way you compensate your employees.

    You may also be interested in

    Stay connected

    Sign up for our updates.

    We have a pretty great podcast & insights that dig into issues you really care about.