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Employment Law FAQ

What is the Difference Between Overtime Pay and Compensatory Time?

Overtime Compensation

Under the Fair Labor Standards Act (FLSA), employers are required to pay covered, nonexempt employees overtime pay at the rate of one and half times the regular rate of pay for any hours worked over 40 hours within a seven day period. The FLSA also provides:

  • Employers are not required to pay overtime or other special pay for employees who work weekends or holidays unless the employee has worked over 40 hours
  • Employers are required to pay overtime pay during the regular pay period for the time worked
  • Employees are not allowed to waive their rights to overtime compensation
  • Employers are not permitted to circumvent the FLSA by stating as policy it will not pay overtime pay or that employees are not allowed to work more than 40 hours per week

In order to be a covered employee under the FLSA, the employee must fit into one of two categories:

  • Enterprise coverage: employees who work for certain businesses or organizations that have at least two employees and who have an annual dollar volume or sales or business of at least $500,000. Enterprise coverage also applies to hospitals and other businesses providing medical care or nursing care, residents, schools and preschools and government agencies.
  • Individual coverage: employees whose work regularly involves them in interstate commerce, including producing goods for interstate commerce.

Additionally, the employee may not be exempted from overtime pay under the Act. The FLSA contains lists of several categories of employees who are exempt from the overtime pay provisions either wholly or partially, including those who work in an executive, administrative or professional capacity, certain agricultural workers and certain railroad, motor carrier and air carrier employees, for example. A complete list of exempt employees can be found at 29 USCA Sec. 213.

Compensatory Time

Compensatory time is when an employer provides the option to an employee of receiving additional time off from work in exchange for hours worked, rather than provide additional pay. Private employers are prohibited under Section 7 of the FLSA from providing compensatory time in lieu of overtime pay to employees who are not exempted under the Act. However, private employers may provide compensatory time to nonexempt employees as another type of benefit, so long as it is not in connection with overtime hours worked by the employee.

Public sector employers are permitted to provide compensatory time in place of overtime pay under the provisions of the FLSA in limited situations.

Overtime pay is available to employees despite the manner they are normally paid. Thus, whether the employee is salaried, hourly or paid by commission, daily rate or by some other method, the employee is entitled to overtime pay so long as he or she meets the requirements of the FLSA and does not fall within one of the exemptions. If you are owed overtime compensation or have additional questions about filing a wages and hours claim under state or federal law, contact an experienced employment attorney in your area.

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