Many employers seek to avoid paying overtime compensation by providing compensatory time off, or “comp time,” to non-exempt employees who work more than eight hours in a day or more than 40 hours per week. Although compensatory time off is permitted under the law for some employees, applicable regulations make it impractical for private employers in California to utilize comp time as an alternative to overtime in most instances.
Private employers in California may provide compensatory time off to non-exempt employees in lieu of overtime compensation only if:
- the employee is subject to Wage Order 2, 4, 6, 7, 9, 11, 12, or 15;
- the employee voluntarily requests compensatory time off in writing in lieu of overtime compensation;
- the employee is regularly scheduled to work 40 hours per week;
- compensatory time off is provided pursuant to a written agreement reached before the work in question is performed;
- compensatory time off is provided at overtime rates (i.e., 1.5 or 2.0 hours of comp time are granted for every hour of overtime worked by the employee);
- the employee does not work more than 40 hours during the week in question; and
- compensatory time off is taken in the same pay period in which it is earned.
Unused compensatory time off, like vacation, is payable at termination of employment.
Employers should also keep in mind that compensatory time off is a concept relevant only to non-exempt employees. If an employer classifies certain employees as exempt, but grants compensatory time off to them when they work in excess of eight hours in a day or 40 hours in a week, it may compromise the exempt status of such employees. Employers who wish to recognize extraordinary contributions by exempt employees can give their exempt employees additional paid time off as a reward for their hard work, but they should do so sparingly, and they should simply select an arbitrary amount of paid time they believe is appropriate under the circumstances, rather than having exempt employees track their hours and granting compensatory time off based on a mathematical formula.
In light of the practical difficulty experienced by most organizations in complying with comp time regulations, we generally recommend that employers not provide compensatory time off to their employees in lieu of overtime. Employers who insist upon utilizing comp time as an alternative to overtime pay should comply strictly with each of the applicable requirements and maintain documentation reflecting their compliance.