As we discussed last week, makeup time provides flexibility for California employers and employees to offset time taken off within the same workweek without incurring overtime obligations. Additionally, the California Labor Code permits the use of compensatory time, commonly known as “comp time.” However, the federal Fair Labor Standards Act (FLSA) imposes significant limitations on how California employers can implement comp time. Here are five key issues that California employers need to understand about comp time:

1. Definition and Purpose of Comp Time

Compensatory time off, often referred to as “comp time,” allows employees to take time off instead of receiving overtime pay. This concept is frequently used to address the needs of both employers and employees. However, many California employers implement comp time without fully understanding the applicable rules and regulations.

2. Legal Framework in California

In California, the rules governing comp time are detailed in Labor Code section 204.3. According to this code:

  • Comp time must be provided at the same rate as the overtime rate, typically one and one-half hours per hour of overtime worked.
  • There must be a written agreement between the employer and the employee before the overtime work is performed.
  • Employees must request comp time in writing.
  • Employees must be regularly scheduled to work at least 40 hours per week and cannot accrue more than 240 hours of comp time.
  • Upon termination, any unused comp time must be paid out at the employee’s final regular rate of pay or the average rate over the last three years, whichever is higher.

3. Use and Accrual Limits

Under California law, employees can request to use their accrued comp time within a reasonable period after making the request. Additionally, employees can ask for their accrued comp time to be paid in cash if it has been accrued for at least two pay periods. However, certain industries governed by specific Industrial Welfare Commission Orders are exempt from these provisions.

4. Federal Law Prohibits Comp Time by Private Employers

While California’s Labor Code section 204.3 sounds promising for employers, Federal law, specifically 29 U.S.C. §207(o), influences how comp time can be used. This federal regulation only applies to state and local government employees, not to private employers. Therefore, California employers must be cautious when using comp time to avoid violating federal laws, which mandate overtime pay for hours worked over 40 in a week.

5. Practical Implications

While comp time may seem like a useful tool for managing overtime, the overlap of state and federal laws can complicate its implementation. For most California employers, comp time must be taken within the same workweek it is earned (and comply with the other parameters set forth above) to comply with federal overtime requirements. Failure to do so can result in legal issues, making it essential for employers to understand both state and federal regulations thoroughly before offering comp time to employees.