Comprehending Compensatory Time

In the ever-evolving landscape of employment law, it is crucial for both employers and employees in Kentucky to stay informed about statutes that impact work arrangements. One of these aspects is compensatory time, which is a practice that allows employers to offer paid time off in lieu of overtime pay. This is outlined in KRS 337.285, which addresses accrual, use, and payment of compensatory time for public employees. Previously, compensatory time was only an option for counties. However, in 2009 the legislature amended KRS 337.285 to allow cities to offer compensatory time to their nonexempt employees.

KRS 337.285 only applies to nonexempt employees; exempt employees are not incorporated into the statute. An employer must choose to offer compensatory time to their employees. They do not have to do so, as the employer can opt to only offer overtime for hours worked in excess of 40 hours in a work week. If the employer decides to offer comp time, an employee must make a request to accrue comp time. The request must be made freely, in writing, and without pressure or suggestion by the employer. Even if the city decides to offer comp time, employees remain eligible to simply receive overtime if they choose. Just like overtime, comp time is accrued at the pay rate of one- and one-half hours for each hour the employee is authorized to work in excess of 40 hours in a work week.

Section 5 of the statute contains the maximums for comp time. Employees who are engaged in public safety, emergency response, or a seasonal activity may accrue up to 480 hours of comp time. For all other employees, the maximum is 240 hours. Any hours in excess of the maximum must be paid to the employee in overtime compensation at the regular rate earned by the employee at the time the employee receives the payment. Just as the statute describes, these are maximums. An employer could decide to offer comp time but lower the maximum number of hours to whatever it would like.

An employee who wishes to use their accrued comp time is allowed to do so within a reasonable period after making the request to the employer, as long as it does not unduly disrupt the operations of the employer. Mere inconvenience does not justify the employer denying the employee’s use of comp time. Comp time also cannot be used to avoid statutory overtime compensation such as an employee being forced to accept more comp time than an employer can realistically be able to grant within a reasonable period of time.

Upon termination of employment, all comp time that has been accrued but remains unused must be paid at a rate of compensation not less than the average rate received by the employee during the last three years or the final regular rate received by the employee, whichever is higher. In other words, an employee does not forfeit their accrued compensation at separation.

Very different rules can be applied to exempt employees. These employees are not entitled to overtime or comp time. However, an employer may choose to offer comp time to exempt employees as a perk and to keep the employer competitive in the job market. In this situation, the maximum hours of comp time can be whatever the employer decides. Comp time can be hour for hour rather than time and a half, the employer can determine time parameters on when the employee must use the comp time, and the employer can decide that the employee is not paid out for unused comp time at separation.

Employers must carefully adhere to KRS 337.285 when implementing comp time. Employers need to have a clear policy on the subject which incorporates an agreement for nonexempt employees to voluntarily opt into comp time. It is important for employers to communicate to employees their rights under KRS 337.285. Both employers and employees alike must be well-versed in the provisions of this statute to foster fair and compliant working conditions.

For additional questions regarding compensatory time for both exempt and nonexempt employees or any personnel-related matters, contact KLC Personnel Services Attorney Michael Simon.