May Private Employers Provide Compensatory Time in Lieu of Overtime Pay to Employees to Compensate Them for Overtime Hours Worked?
Some studies have indicated that up to 30 percent of employers have used Compensatory Time, often referred to as “Comp time” to compensate employees for overtime hours. The question is whether this is a lawful practice, especially if agreed to or preferred by an employee? The answer is simple – private employers in Colorado may not pay non-exempt employees Comp time in lieu of overtime compensation. Such a practice violates both the Fair Labor Standards Act (“FLSA”) and Colorado COMPS Order No. 38.
Employer Requirements for Overtime Pay
Under the FLSA and Colorado Overtime and COMPS Order, non-exempt employees who work overtime must be paid one and one-half times the employee’s regular hourly rate for the overtime hours worked. If an employer fails to pay employees at the overtime rate for overtime, the employer may be liable for back pay for the unpaid overtime hours, and liquidated damages (double the amount of back pay) if the violation is found to be willful. An employee who prevails on a FLSA claim in court is also entitled to recover attorneys’ fees and costs. The statute of limitations for overtime violations under the FLSA is generally two years, but may extend to three years for a willful violation.
What is Compensatory Time?
Some employers provide non-exempt employees with “Comp time” instead of overtime pay to compensate employees for working overtime. Under this practice, the employer attempts to compensate employees for overtime hours with time off instead of overtime pay. To illustrate, an employee may work 56 hours in a work week. Rather than pay the employee for 16 hours of overtime at one and one-half times the employee’s regular rate of pay, the employer allows the employee to take 16 hours off at a later date.
Is Compensatory Time Legal in Colorado?
Even though the practice is relatively widespread, employers must realize that the use of Comp time, instead of paying overtime, violates both the FLSA and COMPS Order for private employers. As expressly stated in COMPS NO. 38, “Employers cannot provide time off (“comp time”) instead of time-and-a-half premium pay for overtime hours.”
Exceptions for Colorado Public Employers
Employers should not be confused or misled by an exception that exists for public employers. Government agencies are allowed to use Comp time to compensate employees for overtime hours. This exception is found in Section 7(o) of the FLSA, and applies only to “Employees of a public agency which is a State, a political subdivision of a State, or an interstate government agency…” Because this provision is restricted to “public agencies,” courts have found that private companies are not allowed to provide Comp time under this provision.
Can An Employee Request Comp Pay Instead of Overtime Pay?
Further, the fact that an employee may agree to a Comp time policy – or express a
preference for Comp time over overtime pay – is not a defense for a private employer. Thus, if an employee approaches an employer and asks to be paid Comp time instead of overtime at the statutory rate, the employer must decline the request. The employee may initially agree and still sue the employer later for providing Comp time as opposed to overtime pay for overtime hours worked. The obligation to pay overtime non-exempt workers is a matter required by Federal and Colorado law, and cannot be changed by a private agreement (even if it is in writing and completely voluntary).
Can Colorado Employees Sue Over Comp Pay?
If an employer provides Comp time to compensate a non-exempt employee for overtime hours worked, the employer has not satisfied its obligation under the FLSA and COMPS Order to pay overtime. As a result, even after providing the Comp time, the employer must still pay the employee (or employees) for the overtime hours at the statutory rate. Especially if a Comp time policy has been in place for an extended period of time and involves multiple employees, the liability may be very significant – especially if liquidated damages and attorneys’ fees and costs are awarded.