Bank of America Suit: The Pitfalls of Substituting Comp Time for Overtime

In yet another case illustrating the pitfalls of giving employees compensatory (or “comp”) time in lieu of paying overtime, a wage and hour lawsuit was recently filed against the Bank of America. The suit, filed as a collective action, alleges that bank tellers and personal bankers in Bank of America branches throughout the United States were systematically denied overtime pay. 

In addition to allegations that the bank gave them comp time instead of paying overtime, the complaint alleges that Bank of America instructed these tellers and personal bankers not to record any hours they worked over 40 in a workweek.  The Plaintiffs also allege that Bank of America simply eliminated overtime hours from the tellers’ and personal bankers’ time records.  If true, the practices concerning the hiding or eliminating of overtime hours would represent particularly egregious practices on Bank of America’s part.  
The practice of providing employees with time off in lieu of paying them overtime compensation may not seem so nefarious, but it is still generally illegal for private employers.  Unfortunately, private sector employers often believe in good faith that giving comp time is a legitimate and permissible alternative to paying overtime. 

Except in certain tightly controlled public employment situations, the Fair Labor Standards Act does not allow employers to substitute compensatory time off for overtime pay.  Overtime must be paid at one and one-half times an employee's regular rate of pay for all hours actually worked in excess of 40 in any one workweek.  Employers can certainly provide their employees with comp time as an added benefit for working overtime hours, but overtime hours worked must be appropriately compensated regardless.    

Even the Government Doesn't Get the Overtime Laws: EEOC Held Liable for Misusing "Comp Time"

In a recent decision, a Federal Mediation and Conciliation Service arbitrator found that the Equal Employment Opportunity Commission had consistently failed to pay many employees proper overtime wages for hours worked in excess of 40 hours per workweek.   Instead, the EEOC engaged in the often misused practice of providing compensatory time off (“comp time”) to these employees. While an exception to the FLSA permits most government agencies to offer certain non-exempt employees a choice between overtime pay and comp time, the EEOC apparently erred by failing to give employees a real choice. When it comes to interpreting the overtime rules, even the government agencies can’t seem to get it right.

In the limited situations in which employers can offer comp time to an employee in lieu of overtime pay, the employer generally must give the employee 1.5 hours of comp time for every hour of overtime worked. This practice is not legal for the vast majority of private employers, and local and state governments can offer only their non-exempt employees comp time instead of overtime pay in certain situations. Thus, both government entities and private employers who grant employees comp time often still end up having to pay employees overtime pay for the hours they work in excess of 40 in a workweek.

The confusion on this issue has resulted in numerous overtime claims [e.g., Beck v. City of Cleveland, 390 F.3d 912 (6th Cir. 2005), Heaton v. Moore, 43 F. 3d 1176 (8th Cir. 1994), Maldonado v. Administracion de Correccion, 1992 WL 301403 (D. Puerto Rico)]. Giving comp has been a common (but illegal) practice in many industries and has resulted in employees being denied substantial amounts of overtime pay. In light of current economic conditions, even more companies may be tempted to try to avoid overtime costs and giving time off may seem like an attractive alternative. Using comp time, however, is clearly not the solution.