Rules for Private Sector Employees
Private sector employees may adjust daily working hours so that total work hours in the week remains 40. For instance, an employer may arrange work schedules so that an employee works three 10-hour days and two five-hour days a week, or four ten-hour days and three weekly off days, without making any overtime payment. However, once the total hours of work exceeds 40 a week, overtime provisions apply. It is not possible to take the average of two or more weeks to determine whether overtime applies.
The employer may, however, allow or insist the employee take the time-off within the same pay period as the overtime worked, taking advantage of the “time-off plans" allowed by the US Department of Labor. Such time-off plans allow employees to take one-and-an-half hour off for every hour of work above 40 hours, but require the employee to avail the compensatory off during the same pay period in which they put in extra hours. Carry-over or accumulation of compensatory hours is not possible, and the employer has to pay overtime wages for overtime worked at the same pay period.
The courts have confirmed that the employer may not credit an employee with compensatory time even at a time and one-half rate if taken at a different pay period than when the overtime accrued, and that overtime payment at the prescribed rate is a must in such cases. For instance, an employee who works fifty hours in the first week of a monthly pay period may avail fifteen hours of compensatory time off anytime during the rest of the month, and the employer has the option of providing the employee with such compensatory time off in lieu of overtime pay. However, an employee who works fifty hours in the last week of the month cannot take the accrued fifteen hours, as it would spill over to the next pay period, and the only option for the employer is to pay overtime wages due.
The U.S. Department of Labor,however, restricts applying such time off plans to a salaried employee paid "fixed salary for a fluctuating workweek," rendering these provisions inapplicable in most cases. The applicability of various states laws may further complicate the situation. For instance, the Texas Payday Law requires paying non-exempt employees at least twice per month, effectively limiting the time-off plan to a two-week cycle.
Employers need to have a serious look at what the FLSA says about compensatory time, for violation of FLSA provisions place the employer on the wrong side of the law, and attract huge penalties. Any aggrieved employee may file a FLSA claim that can go back as far as three years.