Q: I run a small business where our customer needs are very cyclical. Like a lot of retailers, we make most of our money in 3-4 months of the year. My company employs about 15 workers. Most of these employees are part-time but some are full-time. I attended a seminar recently where the seminar leader said you could not offer compensation time to full-time workers. If I can’t do this, it would severely limit my ability to employ full-time staff. Can you help me better understand if I can or can not offer comp time to my full-time employees?
A: Providing compensatory time (or “comp” time) is a common practice in some industries. This practice, giving an employee time off instead of paying the employee, can be used lawfully sometimes.
Generally, state and federal law require employers to provide non-exempt employees overtime pay, at one and a half times their regular rate, when they work more than 40 hours in a work week. A retail sales person almost always must be classified as non-exempt. Some employees (e.g., outside sales representatives or managers) are “exempt” from the overtime requirement.
I consulted Daniel Field, a partner with Morgan, Brown & Joy, LLP, a firm which focuses exclusively on representing employers in employment and labor law matters. Field warns, “Federal and state law prohibit the use of comp time for overtime eligible employees in weeks in which they work more than 40 hours. Providing comp time instead of paying overtime in such a work week would constitute a violation of the federal overtime law (called the Fair Labor Standards Act or ‘FLSA’). This action would also violate Massachusetts and most other New England states’ corresponding overtime laws.”
According to Field, former chief of the Massachusetts Attorney General's wage enforcement division, “Employees who work extra hours may receive compensatory time off within the same work week because it does not affect the calculation of hours worked or the overtime due. This is because an employee’s compensatory time off (for which the employee is paid but does not work) is not counted toward the 40 hour calculation. In addition, employers may normally (but don’t have to) pay overtime exempt employees comp time when they work beyond their normal week.”
Most employers are trying to reduce costs in this economy. However, even unintentional violations of wage and hour laws present significant problems for businesses because, under Massachusetts law, employees can recover automatic triple damages, and their attorneys’ fees from their employer. Increasing numbers of businesses, even very small ones, have been facing expensive class action wage-hour lawsuits brought by attorneys on behalf of affected employees.