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Overtime vs. comp time more than a question of preference

Tired and frustrated, especially as the holiday season approaches and they have no time for shopping, “they come to us and say, “Can’t you give me time off?,”’ says Robert Legge, vice president of human resources.
“We’d love to,” he says. But under the Fair Labor Standards Act of 1938, companies are required to pay covered employees time and a half for more than 40 hours of work a week.
Thus, even though some companies offer compensatory time, it is illegal unless an employee is exempt from the FLSA or works in the public sector, says attorney Peter Spinelli, chairman of the labor and management department at Harris, Beach & Wilcox LLP.
That may change. Pending legislation in Congress would permit employees who work overtime to have a choice between extra money and time off, if their employer agrees.
Covered workers–mostly hourly employees–could choose 1/ hours of compensatory time for every hour of overtime they work. Instead of overtime pay, they in effect would be getting additional paid vacation, explains Spinelli.
The situation is more complicated for employees who are exempt from the FLSA, mostly so-called white-collar workers. Generally, they are not entitled to overtime pay or comp time, although some employers do offer time off in exchange for extra hours of work.
Since the rules are so different for the two groups–exempt and non-exempt workers–proper classification of an employee’s status is vital. Unfortunately, it also is very hard, says Nelson Thomas, an attorney in the Labor Group at Nixon, Hargrave, Devans & Doyle LLP.
Generally, people who make decisions on the job are exempt, he says. They are executives, administrators or professionals who exercise independent judgment and direct the work of other employees.
The work of non-exempt employees is routine with set standards and rules. The position generally does not require independent judgment.
For example, says Thomas, a newspaper reporter is exempt, a pressman is non-exempt; an attorney is exempt, a secretary is non-exempt. Many employers make the mistake of thinking that how people are paid determines their status. They believe salaried employees are exempt, hourly workers non-exempt.
That is not the test, says Spinelli. Proper classification depends on the work that is performed and not on salary or hourly pay, he says.
“A client might say, “My secretary is exempt because she gets a weekly salary. I’m paying her $300 a week.”’
In reality, says Spinelli, he is paying her $7.50 an hour because her duties are those of a non-exempt worker. Therefore, she is entitled to overtime.
Exempt employees have no basis for asking for overtime. However, some employers say, “I expect you to work as many hours as needed but I’ll probably give you time off in the future,” he says.
This is legal, he says, since exempt employees are not entitled to overtime pay in the first place.
But a pitfall exists. Giving an exempt employee comp time could change her status under the FLSA, he says, because the employee is being treated like a non-exempt worker. Conceivably, the worker could complain to the Department of Labor and cause legal trouble for the employer.
In addition, Legge says he has heard that some employers who tracked hours of exempt employees and offered them time off in an attempt to be equitable “have gotten into trouble legally. The Department of Labor might say they are not exempt employees if their hours are being tracked.”
Some companies are taking that risk in an informal way, says Christopher Wiest, director of human-resource information for the Industrial Management Council. “To say it doesn’t happen would be misleading,” he says.
Companies want to do the right thing by rewarding exempt workers for extra hours of work, but it is a predicament of current law that giving comp time can jeopardize that status, he says.
The IMC gets many questions from puzzled employers about exempt and non-exempt issues, he says.
Although overtime regulations for non-exempt workers are relatively clear, many agree with Legge that the law needs to be updated to allow workers a choice between overtime and comp time.
The intent of the 1938 Fair Labor Standards Act was to ensure that hourly workers would be treated fairly. But “things were different then,” Legge says.
Nowadays many people are stressed out as they try to balance the needs of family and job in two-worker families. Besides, unlike the baby-boomer generation, members of this latest generation do not want to work 80 hours a week and miss seeing their children grow up, he says.
A poll of 808 workers taken last year for the Employment Policy Foundation, a Washington, D.C., research and educational organization supported by the business community, indicates comp time is indeed a popular option.
Seventy-five percent of hourly employees surveyed said they would favor comp time over time-and-a-half pay.
The survey indicates that for many workers “time is more valuable than cash,” says Sandra Boyd, assistant general counsel for the Labor Policy Association in Washington, D.C. Companies are getting more and more requests for this option, she says.
“Time is a commodity many people want more of,” agrees Betsy Harrison, president and CEO of Career Development Services Inc. in Rochester. Working parents, for example, might welcome a couple extra hours with their children at the end of the month.
“I feel the first step is to offer a choice,” she says.
House Bill 2391, known as the Working Families Flexibility Act and passed July 30, would do just that. A similar bill is pending in the Senate.
The bill has not met with praise from everybody. Spinelli says President Clinton is leery of it because he fears employers would coerce employees into taking comp time instead of overtime pay, and would offer overtime only to those willing to accept comp time.
In addition, organized labor is concerned that hourly wages eventually could be diluted, says Wiest.
An AFL-CIO poll in June showed 64 percent of hourly employees preferred time-and-a-half pay to comp time, according to the New York Times.
However, Spinelli says the House bill has been amended to address some Democratic concerns. Employers would have to give 30 days’ notice before paying off accrued comp time or stopping the comp- time program. Also, employees could withdraw from the plan at any time.
The House bill passed 225-195, not enough to override a potential presidential veto.
If the legislation becomes law, Legge believes most employees would choose overtime pay, though he predicts some would give up the extra cash for comp time in order to do their Christmas shopping, go to a daughter’s soccer game, spend an afternoon with their parents, drive a son to college or just relax.
“We are very much in favor of the (proposed) law,” says Legge.
From an employer’s viewpoint, the legislation has the advantage of keeping the payroll constant.
“I (could) go to the employee and say, “If you work an extra 10 hours, I’ll give you 15 hours of comp time,”’ says Spinelli. Since the employee earns her regular rate of pay for comp time, the payroll stays the same.
Depending on how the bill is written, however, there could be a downside for employers. Employees could pile up large blocks of comp time and want to take it at an inconvenient time.
Perhaps a secretary takes short lunch hours and works late over a period of time. Eventually she has enough comp time to take a three-week vacation, “but you still need a secretary,” says Spinelli.
Or a line supervisor approves a lot of comp time because he does not wish to discourage a worker who wants to get the job done.
Do you ask others to work harder? Hire extra help to fill in?
Another problem could arise with the retirement of an employee who built up many hours of comp time. If most of it was accumulated when his pay was $10 an hour, but he is earning $15 an hour at retirement, Spinelli says his lump-sum payment for all the comp time would have to be paid at the latter rate.
This all goes to show, Spinelli says, that comp time “can be a two-edged sword.”
(Ann Fox is a Rochester-area free-lance writer.)

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