Many business owners think they’re helping overtime-eligible employees by offering them comp time instead of paying them overtime, but they’re actually putting themselves at risk of a lawsuit.
In a recent survey by TSheets, a provider of employee time tracking software, 30 percent of private-sector employers surveyed said they use comp time with nonexempt (overtime-eligible) employees — a common violation of the federal Fair Labor Standards Act.
In addition, 18 percent of employers offered nonexempt employees a choice between comp time and overtime, anticipating that some employees might prefer time off to overtime pay.
“They’re trying to give employees flexibility,” says Simon Worsfold, an analyst with Idaho-based TSheets.
Still, they may be surprised to learn that by doing so they are violating the law, which requires employers to pay eligible non-exempt employees time-and-a-half if the employee puts in more than 40 hours in a workweek.
“Unpaid overtime is one of the highest risk areas for an employer,” says Worsfold. “It’s a complex area, and it’s hard for particularly small businesses to know all the ins and outs of it.”
And violations are rising.
In fiscal year 2016, 10,884 overtime violations nationally resulted in the payment of $171.9 million in back wages to employees, up from 10,496 workers in fiscal year 2015, according to the U.S. Department of Labor’s Wage and Hour Division. This figure includes not paying nonexempt employees time-and-a-half when they work more than 40 hours.
The law is clear.
“An employer has to pay an employee for every single hour” he or she works, says David Mahoney, a partner and member of the labor/employment law group at SilvermanAcampora inn Jericho. “An employee can’t agree to waive his or her rights to be paid for every hour worked.”
In most cases where he sees this issue arise, it’s a result of employers’ trying to accommodate their employees, he says.
“Unfortunately, New York wage and hour law doesn’t take into consideration convenience to either the employer or employee, because the larger concern is that failure to strictly abide by the regulations opens up the possibility for abuse on the employer’s part.”
Employers need to be educated about the law and then, in turn, educate their employees through a policy in their employee handbook, says Doug Rowe, a labor/employment partner at Certilman Balin Adler & Hyman in East Meadow.
Rowe says the percentage of employers offering nonexempt employees comp time instead of overtime could be even higher than the TSheets survey suggests. “A lot of employers are fearful of actually disclosing that they are doing something not in compliance with the law,” he says.
In addition to having a clear policy, employers need to track how many hours their employees are actually working, says Worsfold.
For sure, there will be some overtime-eligible employees that may be disappointed that they can’t request comp time instead, but there are ways of dealing with that, says Mykkah Herner, a compensation professional at Seattle-based PayScale, an online salary, benefits and compensation information company.
You may want to ask questions to see what they’re really asking for, he says. They may say they want comp time, but what they mean is they don’t have enough paid time off or flexibility, he says.
“Think about the whole compensation package,” he says.
And make sure you are in compliance.
“The last thing you want to end up with is an FLSA lawsuit,” says Patrick Adcock, an analyst with TSheets.
Percentage of employers who said they don’t pay their nonexempt employees either overtime or comp time when they work overtime.