Policies on Compensatory Time for Exempt Employees

Employers who hire workers in positions that are exempt from Fair Labor Standards Act overtime provisions -- usually known as exempt employees -- agree to pay their employees the same weekly salary no matter how much work or time on the job they put in. While compensation time is frequently provided to hourly employees in qualifying circumstances rather than paying overtime wages, the FLSA allows employers a wide amount of flexibility in determining their policies for compensatory time for salaried workers.

FLSA Exempt Employees and Compensatory Time

By definition of their exempt status, an exempt employee may work any number of hours in a single workweek and not receive overtime pay. Because of this, many employers don't extend compensatory time to exempt workers when they work unusual amounts during a workweek -- their job description is created to avoid overtime or compensatory time. Employers who provide compensatory time to exempt employees as a reward for extended hours don't place employees' exempt status at risk, as 29 C.F.R. §553.28 allows employers to provide exempt workers with additional benefits beyond FLSA-mandated salaries without altering their FLSA status.

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Non-FLSA Mandated Compensatory Time

The FLSA requires that employers must provide hourly workers compensatory time equal to 1.5 times the amount of overtime they work but doesn't address compensatory time for exempt employees. Because of this, employers can provide exempt workers with comp time at any ratio they choose, just as they can opt not to provide compensatory time at all to those employees. Unlike hourly employees, who must be paid for unused compensatory time when they leave their position, exempt employees aren't entitled to receive compensation for unused time, according to 29 C.F.R. §553.28(e). However, employers may choose to pay for unused comp time.

"Docking" Exempt Employees' Compensatory Time

Some employers enact policies that allow salaried employees who receive compensatory time to place that time in a bank to be used at will, similar to personal leave. While this policy doesn't violate regulations for FLSA-exempt employees, employers must allow workers to use the compensatory time as needed. Employers who "dock" salaried employees' accrued compensatory time for hours not worked during a normal work week may risk losing their FLSA exemptions. Because exempt employees must receive a consistent salary regardless of the time spent at work each week to maintain their exempt status, punitively using accrued compensatory time for absences violates FLSA exemption rules.

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Bonus Hourly Compensation

Rather than providing exempt employees with paid time off as compensation, some employers provide cash compensation for overtime hours worked. This compensation must be paid in addition to the employee's standard salary and is considered additional compensation that doesn't threaten an employee's exempt status, according to 29 C.F.R. §541.604(a) and positions advanced by the Department of Labor. However, some circuit courts disagree with the Department of Labor's stance on the matter, claiming that additional compensation violates the spirit of a salary agreement, according to the Texas Workforce Commission.

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