One of the more frequent questions ASE receives from private employers is about how to practice compensatory time off. Compensatory time off is the practice of “paying” overtime worked through paid time off at some later time. ASE frequently advises that most compensatory time practices are illegal. The Fair Labor Standards Act (FLSA) requires payment to non-exempt employees (hourly and salaried) of time worked over 40 hours in a week at time and one-half pay. Therefore, if an employer offers to provide time off at a later time (usually outside the present pay period) for overtime worked (usually at straight time, not time and one-half) this is a violation of the FLSA.

Michigan has a Law Allowing Compensatory Time

Recently Michigan passed an amendment to Michigan’s employment standards law that permits Michigan employers to set up a compensatory time program. However, this law is very restrictive in what it allows a Michigan employer to practice as compensatory time.

·       First the employer must be covered by Michigan law.

·       Secondly the employer must allow the employee electing compensatory time off 10 paid days per year in addition to the compensatory time.

·       Third, the employee voluntarily consents in writing to receive compensatory time off in lieu of overtime wages prior to working the overtime. This request cannot be coerced, gotten through intimidation, or required as a condition of employment.

·       Fifth, compensatory time must be paid at one and one-half (1.5x) hours for each hour of overtime worked.

·       Lastly, accrued compensatory time may not exceed 240 hours.

That is not all however. The employer must keep records of the agreement for compensatory time off.  A statement of compensatory time earned and paid must be provided to the employee. The employee may ask for pay instead of compensatory time off, and the employer must pay accrued time off within 30 days. The request does not have to be in writing. Compensatory time must be paid at a rate that is not less than the rate it was earned. Compensatory time must be provided when requested by the employee unless its use could be shown as unduly disruptive. Accrued compensatory time must be paid to the employee if they leave employment.  If the employer chooses to cancel the compensatory time or the time off plan, the employer must provide the employee 60 days notice.

Many of the above rules are part of a newly introduced federal compensatory time bill introduced earlier this month by Republicans in the US Congress. The Working Families Flexibility Act of 2017 will amend the FLSA to permit private sector employers to practice “comp time.”

New Federal Compensatory Time Legislation

Just this month a new bill was introduced in Congress to permit compensatory time federally (HR 1180 and S. 801). Similar to Michigan’s law, the employer and employee must agree to this in writing (or by collective bargaining agreement) and in advance. The compensatory time must be paid at time and one-half hours for every hour of overtime the employee works. There is not a prerequisite of other paid time off. The federal bill would allow accrual of up to 160 hours of compensatory time per year. If compensatory time is not taken by the end of the year (calendar or other designation of a year) the compensatory time would be paid out no later than 31 days after the close of the compensatory time year and at the regular rate paid at the time the comp time was accrued or at the employee’s current rate, whichever is higher. The federal bill would allow the employer to pay out accrued compensatory time that exceeds 80 hours with 30 days notice. As with Michigan law the employee may discontinue participation at their sole discretion and may also make a written request for payout of accrued time, and the employer must comply within 30 days. Also, similar to the Michigan law, the comp time must be offered and entered into “knowingly and voluntarily” and cannot be a “take it or leave it condition of employment.”

Employers that violate the federal law would be liable to pay double the amount of the accrued comp time  - minus the comp time that had already been used.

Having been introduced by Republicans this legislation may have traction, given that both houses have Republican majorities and the Republicans also being in the White House. The Democratic response to this bill is that it puts workers at risk of being taken advantage of by unscrupulous employers.

From ASE’s point of view, it would be nice to finally tell employers that they can provide legal compensatory time to its members.

Source: “Comp time for private sector employees: What’s not to like?” Employment and Labor Insider  Constangy Brooks Smith & Prophete LLP 4/13/2017