The Department of Labor recently announced new rules about which employees are entitled to hourly and overtime pay. That has caused many employers, including religious and other not-for-profits, to assess whether they are correctly classifying and compensating their employees. One issue that may come up is how your organization compensates employees for work beyond the required hours in a workweek.
Religious organizations have several questions to answer before determining whether they and their employees even fall under the overtime and minimum-wage rules. But those questions are for another day. Instead, there is one issue that is clearcut for any employer covered by minimum wage laws: compensatory time, or “comp time.”
Comp time is when an employer awards time off in lieu of overtime. The time off might be paid, it might be at a rate higher than the hours worked. In any case, for nonexempt employees, it isn’t permitted. The time any nonexempt employee who works over forty hours in any seven-day work week is entitled to overtime, and it is not replaceable with extra time off. It must be paid in wages, and it must usually be paid within a relatively short period after being earned.
Comp time is attractive for religious nonprofits. They often have events and other irregular occurrences that require extra hours once a year or more. They also have limited budgets and often attract the kind of employees who would gladly take extra time off over some extra wages. But it is not allowed.
In short, don’t use comp time for hourly employees. Although some states allow governmental employees to use comp time, federal law would not allow employers that fall under federal rules to use comp time.
One final note. Since overtime rules don’t apply to exempt employees, it is fine to use comp time for them. The only disadvantage to using comp time with exempt employees is that it likely requires them to track the amount of time they spend working. Since avoiding that paperwork is one of the key advantages to paying qualifying employees enough to be classified as exempt, this benefit is not very commonly offered.
Here’s a helpful blog post going into more details about FLSA and compensatory time: http://www.wagehourinsights.com/2015/07/can-employers-offer-compensatory-time-to-exempt-employees-wage-hour-faq/
Have a question about legal issues affecting religious organizations? Let me know at questions@lawmeetsgospel.com or @LawMeetsGospel.