Practice Areas

Dos and Don’ts of Comp Time

If you’re a private employer and you allow employees to take compensatory (or comp) time, you might be making a big mistake.

Comp time is when employers allow employees to bank overtime hours for use as vacation time or other paid time off at a later date instead of immediately paying the employee overtime for hours worked in excess of 40 per workweek.  While this may seem like a win-win situation for employers and their employees, more often than not, it’s an unlawful practice.

It need not be so, though, and here we offer some tips for private employers in New York looking to offer comp time.

Non-Exempt Employees Must be Paid Overtime

If an employee is non-exempt under either federal or New York law, the employee must be paid overtime wages.  The federal Fair Labor Standards Act (FLSA) specifically prohibits the payment of comp time in lieu of overtime wages by private employers to their non-exempt employees.  And, while comp time is not per se unlawful under the New York Labor Law, New York’s requirements regarding the frequency of payment of wages have the effect of prohibiting payment of comp time to all non-exempt employees.

Non-Exempt Does Not Mean Hourly

Hourly wages are not synonymous with non-exempt status.  As discussed in a prior post, some of your salaried employees may be non-exempt and therefore entitled to overtime wages.  If you’re going to offer comp time to exempt employees, make sure you first review the job duties of your employees to confirm which occupations are actually exempt from overtime pay under federal and state law.

New York Overtime Laws Still Apply to Some Occupations Exempt Under the FLSA

Some occupations that are exempt from overtime under the FLSA are still entitled to overtime under the New York Labor Law.  While these occupations must be paid overtime, New York Labor Law requires an overtime rate of one-and-a-half times the state minimum wage for their overtime hours, regardless of the amount of their regular rate of pay.  This is another reason to review the job duties of the occupations in your business before offering comp time.

New York Does Not Permit Payment of Comp Time to All Exempt Employees

New York’s requirements regarding the frequency of payment of wages also have the effect of prohibiting payment of comp time to exempt employees who earn less than $900/week.  This is a small but important point to remember since the threshold for the salary-basis exemptions under New York Labor Law is actually a lower amount ($600/week at the time of this posting).

Be Thoughtful About Using Comp Time with Exempt Employees

Although the permissibility of comp time is limited, some private employers in New York will still find it useful to reward exempt employees earning over $900/week with extra time for working extra additional hours.  Providing hour-for-hour time off may not be advisable, however.  If comp time is offered regularly, employees may come to expect it every time they work additional hours.  In addition, some employees may take advantage by working additional hours unnecessarily so they can bank extra days off in the future.  If you do offer comp time, make sure to outline the rules clearly in a written policy.