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The accrual of large amounts of compensatory time off can cause a big financial liability for public employers. The Supreme Court may have helped solve this problem by ruling that employers can require employees to use the banked time.
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Public employers scored a victory recently when the Supreme Court ruled in their favor regarding the use of compensatory time off. Under a 1985 amendment to the Fair Labor Standards Act (FLSA), state and local government employers may give nonexempt employees (those employees subject to the FLSA minimum wage and overtime requirements) compensatory time off (or "comp time") instead of paying overtime as long as the covered employees agree to this arrangement. To ensure that employees who earn this time off are compensated appropriately, the FLSA also contains several provisions regulating the accumulation and use of the banked time. However, according to the Court, employers still have some discretion to determine when the comp time must be used. Specifically, the Court found in Christensen v. Harris County, No. 98-1167 (5/1/00), that public employers can require employees to use the accrued comp time, without having an agreement that addresses this requirement.
County Required Use of Comp Time; Employees Sued
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In this case, the municipal employer, Harris County, implemented a comp time program as permitted by the FLSA. The FLSA allows state and local employers to compensate nonexempt employees for overtime by giving them time off at a rate of one and one-half hours for every hour worked over 40 in a single workweek. For employers to implement this type of plan, employees must agree to the program. In addition, the FLSA includes several safeguards to protect employees, including caps on the amount of time off that can be accrued and a requirement that all unused time be paid out at termination. In addition, the Act requires the employer to grant a request to use the accrued leave within a "reasonable period" of time following the request, as long as the time off would not "unduly disrupt" the employer's operations.
After adopting the plan, the County became concerned about its financial liability for the unused, accrued comp time and its ability to pay overtime wages once employees reached the caps or at termination. To reduce the accumulated time, the County considered adopting a plan that would require its nonexempt deputy sheriffs to take their comp time. The County consulted the federal Department of Labor (DOL) Wage and Hour Division for an opinion on this practice and was informed in an advisory opinion letter that employers cannot require the use of compensatory time unless there is a prior agreement stipulating this requirement. In spite of this letter, the County implemented a policy authorizing supervisors to require employees to use their accumulated comp time in order to reduce the banked hours.
The County's deputy sheriffs sued, claiming that the policy violated the FLSA because there was no agreement regarding the mandatory use of comp time. The lower court agreed, and the County appealed. The Fifth Circuit Court of Appeals reversed the lower court's decision and found in favor of the employer. The Supreme Court agreed to review the case in order to resolve the disagreement over this issue that exists in the different Courts of Appeals. The Ninth Circuit (like the Fifth), in Collins v. Lobdell, 188 F.3d 1124 (9th Cir. 1999), upheld an employer's policy compelling comp time use, while the Eighth Circuit, in Heaton v. Moore, 43 F.3d 1176 (8th Cir. 1994), struck down a similar policy.
DOL Opinion Letter Not Persuasive
The Court began its analysis by looking at the language of section 207(o) of the FLSA, which allows the accrual of comp time, and its implementing regulations. The Court noted that neither the statute nor the regulations specifically requires an employer to have an agreement regarding the mandatory use of comp time. While they contain provisions protecting an employee's right to use the time, they do not prohibit the employer from specifying when the time must be taken. Rather, the Court pointed out that the statute instead "ensures liquidation" of the comp time by allowing the employer to limit the accrual of comp time by decreasing the number of hours an employee works and allows it to cash out the comp time by paying employees instead of giving them the leave time.
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The Court also discounted the value of the DOL opinion letter indicating an agreement was necessary. According to the Court, these types of advisory letters are "entitled to respect" only to the extent that they have "the power to persuade." The Court indicated that a letter may be persuasive if it attempts to interpret language in the statute or regulation that was ambiguous. Since the statute and regulations in question were clear, the letter should not be given any deference or legal weight. Based on these issues, the Court upheld the Fifth Circuit's decision.
Ruling Is Good News for Public Employers
This decision is good news to state and local employers that are concerned about accumulating too much comp time on their books. The Court gives the green light to policies requiring employees to use the time so that it does not become a financial liability. However, employers using comp time in lieu of overtime still must comply with the many other restrictions specifically imposed by statute and regulations on the accrual and use of comp time.
Private employers should note that the use of comp time is only available to state and local employers. As a general rule, private employers can-not substitute comp time for overtime pay and must pay nonexempt employees time and one-half for all hours worked over 40 in a single workweek.
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