What Kind of Back Pay is Due Misclassified Workers Who Receive Comp Time?

"The use of comp time instead of overtime is limited by Section 7(o) of the FLSA [Fair Labor Standards Act] to a public agency that is a state, a political subdivision of a state, or an interstate governmental agency." 

--U.S. Department of Labor

Normally compensatory time off or “comp time” is only allowed for Fair Labor Standards Act (“FLSA”) exempt workers or for nonexempt public sector employees. There is no provision in the FLSA to offer comp time to nonexempt private sector workers, unless it is time off for nonovertime periods of work. Nonexempt employees must be paid premium overtime for hours worked ordinarily over 40 in a work week. However, sometimes employers misclassify their workers as exempt. And sometimes they also mistakenly give those same misclassified employees comp time off instead of overtime pay.

If it turns out they now owed premium overtime pay, is it possible for the employer to get a credit for the comp time pay that was actually furnished?

Yes, it is likely that the employer should receive a credit for comp time paid to or banked on behalf of the covered employees.  Employers are responsible only for unpaid portions of back wages and will be credited for any portions already paid, the theory being that compensatory damages are intended to make the employee whole, not to provide them with a windfall.  See Roman v. Maietta Construction, Inc., 147 F.3d 71, 76-77 (1st Cir. 1998) (affirming trial court’s calculation of back pay that was offset by compensatory time already paid to employee at regular rate);  see also Lupien v. City of Marlborough, 387 F. 3d 83,  89 (1st Cir. 2004) (affirming the offset of the defendant’s liability under FLSA for used compensatory time); Dunlop v. State of New Jersey, 522 F. 2d 504, 517 n.23 (3rd Cir. 1975); D’Camera v. District of Columbia, 722 F. Supp. 799, 803 (D.D.C. 1989). 

Therefore, because the employer has been providing paid comp time at the regular rate for hours worked over 40 hours in a workweek, it should only be responsible to cash out any unused comp time and to otherwise reimburse employees for the unpaid half-time premium for those hours.  29 U.S.C. §207(o); see also 29 C.F.R. §553.28 (detailing the use of “other” or “non-FLSA” compensatory time). 

The FLSA does permit a “time off plan” similar to comp time for nonexempt workers. The allowable plan is one that gives the worker time off in the same work week or work period. For example, if a nonexempt private sector workerer labored twelve hours one day, they can get four hours off the next day in the same work week, and no overtime is due under the FLSA because the worker still labored under 40 hours in a week. But the time off may not be carried over into the next work week even if it is the same payroll period. And note that this same time off plan would not be feasible in a state like California which has a daily overtime requirement.