The Fair Labor Standards Act requires that most employees be paid for every hour worked, and be paid time and a half for every hour worked over forty hours in a week. There are limited exceptions to this rule. One of the exceptions is that government employers are allowed to substitute compensatory time off instead of giving monetary compensation for the extra time worked. However, because it is an exception, the Department of Labor reviews this exception narrowly and it is full of liability pitfalls for the unwary employer.
Here is a primer into the unique language of employment law. “Non-exempt” is a legal term in the Fair Labor Standards Act that refers to employees who are paid by the hour. Most court employees will be non-exempt, including clerks, probation officers and bailiffs. Court reporters are a special category of classification under the FLSA and a future article will address the compensation requirements for court reporters. An “exempt” employee under the Act is an employee who is not entitled to overtime pay or compensatory time when the employee works beyond the regular work hours. Typically, the only exempt employees in a court setting will be the judge and any other persons with supervisory authority over several employees.
You must compensate all non-exempt employees for extra time worked with either monetary payment or compensatory time. There is an odd provision in the Fair Labor Standards Act regulations that says compensatory time may only be substituted for monetary pay if the employee agrees to the substitution. This is not a true agreement. If your policy is to give compensatory time off, rather than pay for the extra work, you must set forth this policy in writing and ask the employee to sign a written document agreeing to this policy. If the employee refuses to sign the agreement, your alternatives are to terminate the employment because you cannot afford to pay for any extra work required, or never allow the employee to work overtime.
If you have not had your non-exempt employees sign a written agreement, you have no proof that the employees agreed to accept compensatory time in lieu of monetary pay. Without the written agreement, your employees could bring action against you for up to two years after they leave the court’s employment, and seek double damages for up to three years back pay. The only way to protect your court funds and the county budget is to always have new employees sign the agreement when they first enter employment and to keep a good record of those agreements. If you do not have those agreements for any current employees, you should initiate new agreements with your employees and include language that this confirms the agreement in effect throughout the employment. The agreement should state that the employee has received and accepted compensatory time in lieu of overtime pay in the past, and that there is no outstanding overtime pay due to the employee.
Compensatory time must be granted in the same manner as monetary pay. For every unit of time between your normal workday and forty hours in a week, you must grant compensatory time equal to the time worked. Thus, if you have a thirty-six hour workweek and the employee works two extra hours, the employee earns two hours of compensatory time. The time between your regular workweek and forty hours is designated as “gap hours” or “gap time,” referring to the gap between your workweek and a forty-hour workweek. Compensatory time is always given on an hour for hour basis for gap hours.
Once the employee has worked forty hours in a week, the compensatory time is earned at the rate of one and a half times the extra time worked. Thus, for an employee with a thirty-six hour workweek, who works forty-two hours in one week, the employee will earn four hours of compensatory time for the gap hours at a one-to-one ratio. The employee will also receive three hours of compensatory time for the two hours worked over forty hours at a 1-½ times ratio earned to the time worked.
Compensatory time off can be a Catch-22. If your non-exempt employees are regularly being required to work overtime, you can end up in a situation in which your employees are earning compensatory time but are not being allowed to use it. This has two negative consequences. The first is that if compensatory time accumulates for an employee in the amount of 240 hours, you must give monetary compensation for those 240 plus hours. There is no longer any discretion to give time instead of money. The second consequence is that the Fair Labor Standard Act requires that you grant use of the earned compensatory time within a “reasonable period” after the employee makes the request. Undue disruption of operations is the only legitimate reason for denying compensatory time leave requests. Undue disruption means more than mere inconvenience. Furthermore, the fact that you may have to pay a premium rate for temporary help is not a legitimate reason to deny use of compensatory time. Therefore, it is important that compensatory time be used only as needed and not allowed to accumulate. There are only negatives to allowing an employee to accumulate large amounts of compensatory time.
Failure to have an agreement, failure to pay for compensatory time above 240 hours earned, and/or failure to give compensatory time earned can all result in a negative audit by the Department of Labor and have negative financial consequences. Remember above all else to be sure you have signed Compensatory Time Agreements for all your non-exempt employees. If you would like a copy of such an agreement, please email me at [email protected] and I will promptly provide a sample for you to use.