It is not uncommon for employers to regularly receive questions from non-exempt employees about “comp time.” “Comp time” or compensated time off can refer to the equitable practice of allowing non-exempt employees to take extra time off from work after a long week instead of receiving overtime pay. Comp time policies are not new, but wage and hour litigation in California is continuing to snare well intentioned employers of all sizes in class action litigation over improperly implemented comp time policies. Employers are best protected from such class claims when they are vigilant about comp time policies and employee paychecks.
While the concept of comp time may seem fair, the problems lie in the execution. Because of the quid pro quo nature of the comp time arrangement, many employers implement comp time policies casually – having only oral agreements with employees and allowing time to be taken off the books. But in California, the laws governing payment to employees (including comp time practices) are stringent and an unwary, though well intended, employer can easily become subject to a wage and hour lawsuit for violating them. Consider the following common missteps.
Misstep 1: Allowing comp time to be accrued and taken off the books. Why is this a problem? California Labor Code section 1174(d) specifically requires businesses to keep accurate records of all hours worked by each employee. If an employer is allowing comp time to be accrued and taken off the books, then the employer has time records that it knows are inconsistent with hours actually worked by that employee in violation of California Labor Code section 1174. Failure to keep accurate records is a misdemeanor under Labor Code section 1175 and subjects an employer to a fine of $100 or imprisonment of not less than 30 days pursuant to Labor Code section 1199.
Misstep 2: Exchanging comp time evenly – one day off for one day worked or 8 hours for 8 hours. Why is this a problem? Comp time does not accrue on an hour for hour basis. Rather, employers must always consider and comply with California’s overtime requirements in connection with the number of hours an employee works in a shift or workweek. For example, assume an employee worked four 10-hour days and one 8-hour day in one workweek for a total of 48 hours worked. For each day the employee worked 10 hours, two (2) of those hours are subject to California’s overtime pay laws requiring the employee to be compensated at a rate of one and one half (1.5) times the employee’s regular rate of pay. (In California, if an employee works over eight (8) hours in a single shift, the additional hours are considered overtime.) If an employer is compensating an employee for those overtime hours worked in comp time instead of overtime pay, the rate the comp time is calculated at remains the same. In this example, the employee should receive 12 hours of comp time which is calculated by multiplying the eight (8) hours of overtime by the applicable rate of compensation, one-and-one-half (1.5). Failure to accurately calculate comp time and overtime is likely to trigger a multitude of derivative Labor Code violations and penalties, including but not limited to unpaid overtime, waiting time penalties, and penalties associated with inaccurate wage statements.
Misstep 3: The arrangement is only agreed upon verbally and is not document in writing. Why is this a problem? Comp time arrangements are required by California Labor Code section 204.3 to be in writing before the work begins. An oral agreement is simply not allowed under the law.
An employer can offer comp time in California, but the employer must comply with Labor Code section 204.3, which requires all of the following:
- Accrual of comp time must be at the overtime rate of pay (not less than one and one-half the regular rate of pay for each hour worked in excess of eight (8) hours in a shift or 40 hours in a workweek, or double time if applicable).
- An employer’s policy regarding comp time must be in writing before comp time work begins.
- Employees may not accrue more than 240 hours of compensatory time off.
- An employee must make a written request for comp time in lieu of overtime pay.
- An employee requesting comp time must be a full time employee who is regularly scheduled to work at least 40 hours in a workweek.
- An employee who takes comp time must be paid at the rate of pay in effect at time of payment.
- At the time of termination, comp time must be paid or cashed out at the higher of either the employee’s current rate of pay or the employee’s three-year average rate of pay.
- An employee must be permitted to use comp time within a reasonable period of time of making the request to the employer. (Essentially, an employer may deny use of comp time only if it would unduly disrupt the employer’s operations).
- An employer must keep records of comp time accrued and used by its employees.
Bottom line – comp time is complicated. And, it only takes one disgruntled employee who has experienced an improperly implemented comp time practice to bring a class action lawsuit which can cost a business thousands of dollars in legal fees. Don’t let this happen to your business! If you have questions regarding compensatory time off or employee compensation, contact Klinedinst PC’s Employment Group for assistance and counseling.
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