COMP ME! Comp-time and you . . or not

Compensatory time is a beautiful thing . . . but you may not be able to use it or grant it; and if you do, you could be setting up yourself – and your company – for major trouble.

What is Comp-time?

According to the Office of Personnel Management site at www.opm.gov, comp-time is:

“Time off with pay in lieu of overtime pay for irregular or occasional overtime work,

or

When permitted under agency flexible work schedule programs, time off with pay in lieu of overtime pay for regularly scheduled or irregular or occasional overtime work.”

Key phrase: Agency

All employers are not eligible to offer compensatory time, only government agencies as in actual government offices, not companies that simply do business under or have a government contract. Federal, state, county, city, township, village, as long as the IRS defines a payroll is defined as a government payroll, compensatory time may be granted if the agency has a defined flexible work schedule program.

. . . but, I own my own business

Uncle Sam doesn’t really care – at least, not in this instance. All businesses – private, public; small, large; government, utility, railroad – you name the employer type – each must follow the payroll rules outlined in the Fair Labor Standards Act of 1938 (FLSA).

Under the current rules, which were updated as recently as the first administration in the second Bush era, all positions that do not meet the overtime exemption rule (see later blog for definitions and explanations) are to be paid at no less than the prevailing minimum wage for up to forty work hours in a seven-day period. Any time worked over forty hours in a seven-day period must be paid at one-and-a-half times the employee’s regular hourly wage.

Key phrase: Any work

“Any work,” is defined as anything done to benefit the employer, whether or not the activity is described within a person’s job description.

Let’s say you’re an employer and you hold mandatory employee meetings of any kind every Wednesday during the lunch hour. You buy everyone pizza and have drinks available for everyone, but you don’t pay them for the lunch hour. Are you violating FLSA?

Oh, yeah.

The meeting, any meeting, especially any kind of meeting, party, whatever, you make mandatory is considered “work suffered” under FLSA and is compensable at the same rate as regular “work suffered”.  If that meeting time adds an extra hour to the forty everyone has already put in during your policy-defined workweek, then you owe all your non-exempt staff time-and-one-half pay for that extra hour.

Let’s say your office needs to be painted, but you don’t have painters budgeted for this year and you ask for volunteers to help you paint over the weekend. You’ll provide the food and soft drinks, they need only come dressed to get dirty. Do you owe these “volunteers” time-and-one-half?

You bet you do: though the work is done on the weekend, it’s still work, and under FLSA, it’s work “suffered” for the benefit of the company. Do you owe overtime for both Saturday and Sunday?

Maybe not: Whether you owe overtime for both days depends upon how your policy book defines your work-week. If your workweek is defined as Monday through Sunday, then, yes, you would owe two days’ worth of overtime. If your workweek is defined as Sunday through Saturday, then you would only owe overtime for Saturday, but still owe regular wages for Sunday.

Companies that require employees to come in early to punch in, make coffee, open up, or whatever, as well as those that require people to stay after hours to close up in any way, must also pay people for their time.

On-call time is also compensated at the same rate as regular work time. If on-call time exceeds the forty-hours in one week timeframe, then they, too, are paid at the premium rate.

. . . but, I can’t afford to pay overtime

Again, I say: Uncle Sam doesn’t care; and let me just add: tough. The rules are clear. They’ve been around for a long time. Since 1938, in fact. You have the Internet. As a fully-grown human, capable of owning a business – or at least running a business – you are expected to have done your “due diligence”.

In other words, the OFCCP, DoL, or any other investigating agency will not accept excuses for what you didn’t know you should know. (I know this, because my first HR job was with an employer who was audited by the OFCCP — two weeks after I started — and let’s just say my predecessors were all let go for good reason).

Is there any way around the rule?

Well, of course there is.

Sort of.

The best way to “get around” this rule is to work within the rule. If you know you must have weekly meetings, one thing you could do is hold the same meeting at least twice and stagger the attendants. This, way, the office stays open, but you will be short coverage for the length of the meeting.

If you must have full coverage, you could have the meeting after hours, as in, immediately after closing, one day a week, and then allow the same amount of time off during the same seven-day work period as the meeting to all non-exempt employees.  Exempt employees are not paid by the hour, so no other compensation is needed for them — money or time, unless specified in the company’s policies.

Key phrase: seven-day work period

Notice I’ve never denoted a pay-period. I’ve always described a seven-day period, and this is because FLSA dictates seven consecutive days as a work period.

If you want to grant a form of comp-time, it must be done the same week during which the extra activity occurs. Technically, this is not comp-time as defined by FLSA, so I always advise not to refer to this time off as “comp-time”. If you’re ever audited by the government, know that employees are always interviewed. Their phrasing and understanding can get you into trouble. Save yourself at the start, and take my advice: don’t ever call this time off “comp-time”.

What if I break the rules?

Well, it’ll cost you, regardless your intent. According to the DoL site, the penalties are:

“Employers who willfully or repeatedly violate the minimum wage or overtime pay requirements are subject to a civil money penalty of up to $1,000 for each such violation.

Willful violations of the FLSA may result in criminal prosecution and the violator fined up to $10,000. A second conviction may result in imprisonment.”

Yikes!

The audit process is not fun, though I guarantee you’ll learn A LOT. I know I did. If you’re interested, take a look at the process on the DoL site. It is every bit as grueling as it reads.

If you’re starting a business, learn the rules and follow them. Teach everyone the rules and their rights and responsibilities, even if everyone is non-exempt and has no supervisory role.

If you’ve already started your business and you know you are in violation in some way, change what you’re doing N-O-W. Note when you learned what you were supposed to do. Note each phase of your correction. Note when the total correction is in place. Keep these notes in a special notebook along with your new policy, any training material, and training proof. Never lose a shred of this notebook and make certain it’s the first thing you hand an auditor if, by any chance, you get audited.

What are the chances of an audit?

Well, from what I’ve been able to find, the DoL hired five hundred auditors to keep up with all the new businesses. When I contacted my local federal DoL auditor, she told me that it may take years for her to get to a business, but once she’s there, she’ll return every two years for the life of the company; because rules change, and people generally cannot keep up with every change. The government always needs money, and fines are a wonderful way to generate some extra cash.

For more information on different employee statuses, audits, and fines, speak to a local labor attorney or go on-line to www.dol.gov/wage & hour.

Disclaimer I am not a licensed attorney or certified accountant. My blogs are based on my own experiences, interviews (where credited), and loads of research.

Copyright © 2009 Diane Faulkner

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COMP ME! Comp-time and you . . or not