It’s summer and that means it’s time for summer vacations. Some employers are unaware of the law regarding when an employee may be paid “comp time” instead of wages. So here’s a brief recap of what you should know.
Absent an exemption (see below), all employees must be paid at an overtime rate of 1.5 times the normal hourly rate for all hours worked in excess of 40.
This means that an employee who earns $20/hr. must be paid $30/hr for each hour worked over 40.
If the employee works 40 hours, he is paid $20 x 40 = $800. If he works 42 hours, he is paid $20 x 40 ($800) plus $30 x 2 ($60) as overtime compensation.
But he may not be paid his regular rate for the first 40 hours ($800) plus 2 hours of “comp time.” No, no, no. All time in excess of 40 must be paid (money in an amount equal to) 1.5 times the normal hourly rate.
Provided the employer complies with Rule #1, the employer may offer comp time as a supplemental form of wages.
One common example of this is paying comp time for hours 35-40. So, in addition to his regular wage of $800, the employee may also be paid 5 hours in comp time as an incentive or reward for working those last five hours. Similarly, some employers offer comp time for premium shifts.
Both scenarios are totally kosher, so long as the employee is receiving his regular wage. Comp time is a supplement not a substitute.
As with any rule, there are exceptions.
But, with comp time, the exceptions are few. An employer may pay an employee comp timein lieu of wages in certain situations. First, exempt employees (those who are not entitled to overtime in the first instance) can be paid comp time for time worked in excess of 40 in a week.
Second, certain public-sector employees may be paid comp time, including state and local government employers. In the public sector, under certain conditions, employees may receive compensatory time off at a rate of 1.5 hours for each overtime worked, instead of cash overtime pay.
Law enforcement, fire protection, and emergency response personnel and employees engaged in seasonal activities may accrue up to 480 hours of comp time; all other state and local government employees may accrue up to 240 hours.
There are exceptions to every rule. For example, some states do not permit the use of comp time or limit accrual to a lesser number than provided by federal law. Before you implement a comp-time system in your workplace, you should consider having it reviewed with legal counsel. And, if you have a comp-time system in place for non-exempt employees as a substitute for overtime pay, you should consider consulting with your employment lawyer to determine whether the system violates state or federal wage payment laws.
See also U.S. DOL Fact Sheet #7 State & Local Governments Under the FLSA
Read more Labor and Employment Law insights from Margaret (Molly) DiBianca in the Delaware Employment Law Blog.
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