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One of the most misunderstood and misapplied sections of the Fair Labor Standards Act (FLSA) deals with overtime and comp time. To illustrate the confusion, consider this example: you have a nonexempt salaried employee who will be working an extra six hours each week for additional training for her position. The extra hours will result in overtime hours each week. The employee is requesting comp time instead of overtime pay. Can you let her track the hours she works (including the training time) and ask her to sign a form indicating her desire to waive overtime pay and instead receive comp time? If so, should the comp time be given to her at time and a half?
As in our example, employees often would rather receive comp time than overtime pay. In fact, they specifically ask for it. Further, questions frequently arise about whether an employer is responsible for an employee’s training time.
To begin figuring out what you can do, you first should determine whether the training time is compensable under the FLSA. For private employers, time spent attending training or educational programs is not working time if (1) attendance occurs outside the employer’s regular hours, (2) attendance is voluntary, (3) the employee does no productive work while in attendance, and (4) the program, lecture, or meeting isn’t directly related to the employee’s job. For the training time to be excluded from work time, the training must meet all four factors. Also, training that is required by the state (as opposed to the employer) and not tailored to meet the particular needs of the employer normally doesn’t need to be counted as compensable work hours under the FLSA.
Overtime for private employers
Once you determine whether the training time is compensable, you must count all hours worked, including any compensable training time. If the hours exceed 40 in a single workweek, you must determine how the overtime will be paid. Simply put, comp time cannot be used for nonexempt employees of private employers. In other words, private employers are not permitted to allow employees to carry overtime hours worked in one workweek to a subsequent workweek by giving them paid time off. That is true even if comp time is authorized or requested by the employee.
One solution to avoid the issue: you may rearrange a nonexempt employee’s schedule in the same workweek to avoid overtime. In general, comp time policies for private employers may be adopted voluntarily for use with salaried exempt employees. Additionally, comp time typically is permitted for public-sector nonexempt employees. For public-sector nonexempt employees, 1 1/2 hours of paid time off must be provided for each overtime hour worked.
Once you’ve looked at the week’s hours, you then calculate the overtime rate. Under the FLSA, the overtime rate is 1 1/2 times the covered nonexempt employee’s regular rate of pay. When nonexempt employees are paid by the hour, the calculation is straightforward. When they are paid on a salary or commission basis, the calculation can be complicated. In those situations, the regular rate normally is determined by dividing the employee’s total regular compensation for the week by the total number of hours worked. Calculations can be tricky when employees receive commissions, bonuses, or other out-of-the-ordinary payments, so be sure you know how to properly calculate the rate in those circumstances.
In short, you are not permitted to use comp time for a nonexempt employee who works more than 40 hours in a single workweek. That is true even if the employee requests or expresses a desire to waive overtime pay and receive comp time instead. Only public-sector employers are allowed to provide comp time to nonexempt employees. Even then, the comp time must be paid at time and a half for all hours worked over 40 hours in a single workweek.
The qualification for overtime pay and the calculation of the rate can be tricky. It’s highly advisable for you to discuss the matter with your employment counsel before administering your system if you have an unusual situation. Failure to pay overtime or maintaining a comp time system that’s found to be invalid can subject you to a penalty of the cash value of all hours’ owed plus additional penalties and damages.