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Can My Employer Pay Comp Time Instead of Overtime?

Does your employer have a “banked hours” or “comp time” policy? If so, chances are good that your employer’s policy is violating federal law. The chances are also good that this comes as a shock to you given how common these polices are. Your next question may be “Why can’t my employer pay comp time instead of overtime?” The simple answer is that comp time, with few exceptions, violates the overtime laws found in the federal Fair Labor Standards Act, or FLSA.

The concept of “comp time” is relatively simple. Under a comp time system an employer allows a worker to “bank” hours worked over 40 hours in a workweek instead of paying the employee overtime. Those hours then become available for the employee to use down the road when the employee needs time off but doesn’t want to miss out on the income. For example, let’s say you worked 43 hours last week and 46 hours this week. Collectively, you worked nine hours of overtime between the two weeks. Instead of paying you overtime, however, your employer “banks” those nine hours. Next month, you have a family emergency and need to miss an entire day of work. Because you have nine “banked” hours, you can miss an entire eight hour day and still be paid for the day, leaving you with one hour of comp time left in your “bank.”

One common reason why comp time systems are not brought to the attention of authorities is for the simple fact that employees often like the systems. Many even prefer comp time to being paid overtime. Unfortunately, however, the FLSA specifically prohibits comp time systems in all but specific situations. Under the FLSA a non-exempt employee working for a covered employer must be paid overtime at the rate of one and one-half the employee’s regular wage for all time worked over 40 hours during a workweek. For the purpose of calculating overtime pay, an employee's workweek is a fixed and regularly recurring period of 168 hours — seven consecutive 24-hour periods.

Although employees often like comp time systems, and they may appear designed with the employee in mind, the reality is that an employer has a financial incentive for using the system. Take a minute to consider those nine hours of overtime mentioned earlier. If paid as overtime, assuming the employee earns $10 an hours, the employer would have to pay the employee $135 (overtime rate of $15/hr x 9 hours = $135). On the other hand, if the employer “allows” the employee to bank those hours the employer only pays the employee $90 (regular rate of $10/hr. x 9 hours = $90). The savings can really add up for the employer, which is the real reason employers prefer comp time to paying overtime.

If your Conshohocken, Pennsylvania employer has been operating under a comp time system, the odds are good that you are owed back pay for all the hours that were “banked” instead of being paid to you as overtime hours. Contact an experienced employment law attorney as soon as possible to discuss your options. Contact the employment law attorneys at Curley & Rothman, LLC by calling 610-834-8819 today to schedule your free consultation.