can overtime be paid with vacation instead of wages?

January 12, 2009 8:16 PM

My employer gives me extra vacation hours instead of actual pay for overtime. Is this legal in California?

I am an hourly wage employee, and I don't fall under the "exempt" category of CA overtime laws as far as I can tell (I am a low-skill assistant for medical research with no degree or training beyond a bachelors). Therefore, the law says I get paid 1.5 times my normal wage for overtime. However, my boss does something a little shadier; we get 1.5 times the overtime worked as extra paid vacation hours. That means if I work 2 hours overtime, I mark my time sheet with the normal hours, add 3 hours to an under-the-table vacation tally, and then when I take that vacation, mark that I actually worked those three hours on my timesheet. Yes, I do essentially get paid in the end, but it reduces my total earnings potential and if I end up with any of this secret paid vacation left at the end, I never earn anything because HR doesn't know about this so it can't get paid out in a final paycheck like normal unused vacation. I won't report this now if it is illegal, because I'd rather keep my job, but at the end of my employment I would consider blowing the whistle if I get robbed of compensation and it is a valid claim. So is it legal or not? There was a suggestion in a previous thread that "comp time" in lieu of overtime pay is illegal, but that was in AZ. What about CA?

posted by anonymous to work & money (12 comments total)

Can you be considered a professional employee exercising your own idea judgment in your work? If so, you are an exempt employee under FLSA requirements. That's the closest category I could consider you under. State laws here are irrelevent since you're non-exempt under federal law. It doesn't matter if state laws are more liberal since you're already covered under all federal labor laws (including paid overtime).

I'm going to guess the answer is no - both from your description of your work and from the fact that your employer even bothers to do anything with your overtime. If they really thought you were exempt, they'd probably not even both to do that.

To answer your question, as a non-exempt employee, overtime needs to be paid at 1.5x your normal wage in cash. So, yes, what they're doing is illegal. However, as you've already noted, if you become a whistleblower, you will probably lose your job. As I've previously stated, employment lawyers love these sorts of cases - you get your money and they get their fees paid for by your employer. Just remember that your case will follow you for a very long time. Even though it's not legal to discriminate against a potential employee due to exercising their legal rights, don't think it doesn't happen.
posted by saeculorum at 8:26 PM on January 12

It is almost certainly illegal.

How to file a wage claim in CA.

How to file a retaliation/discrimination complaint

CA is a very worker-friendly state. Unless you work in a very small industry, I'm not even sure how future employers would find out about this incident in your past. Of course there are risks, but I think the "you'll never work in this town again" scenario painted above is a bit melodramatic.
posted by drjimmy11 at 8:43 PM on January 12

Why is your boss using such a complex system to skirt the law but make sure that you get paid somewhat fairly? Is there a grant that only pays a fixed weekly salary? Is your position normally a salaried position that they are now paying hourly? Are you part of a union? Are you an intern, student or other worker who's hours are capped for some reason?
posted by abirae at 8:50 PM on January 12

It sounds like your boss isn't allowed to have his staff work overtime, so he gives it to you as under-the-table vacation time to keep if off the books. Your HR department probably doesn't know he is doing this and would be pissed if they found out. As much as I try to avoid circumventing the chain of command, you might have to do it in this case. Go talk to HR or your bosses boss and try to get it worked out that way.
posted by indyz at 9:36 PM on January 12

"Banking hours" (offering future time off or additional vacation time) nstead of paying overtime wages is illegal in most states. Employers do this in order to avoid paying higher payroll taxes. If your employer asks you to do this, you may be entitled to back OT pay, and your employer will also be liable for penalties and taxes. Offering comp time in lieu of time-and-a-half pay is illegal in California, according to this article. By the way, this is one labor complaint that usually receives quick attention when the whistle is blown, because the State is always eager to collect any money it is legally owed.
posted by Oriole Adams at 10:41 PM on January 12

Interesting. I used to work in a union position for a local government entity, and always got comp time at time and a half in lieu of overtime pay. I.e. If I worked 46 hours in a week, I got 9 hours comp time. It was standard practice for the whole department. I don't know if that was legal because it was part of the union contract or what, but there was never a whiff of it being anything other than aboveboard. What I had on the books was paid out when I left that job.
posted by gingerbeer at 11:21 PM on January 12

What? If you worked 2 hours overtime, you'd only earn 1.5 x normal, or 1 hour uber secret vacation. Are you really earning 3 hours paid vacation for 2 hours overtime? If so, keep quiet & profit somehow! But I'll assume you miss-typed.

I'd say find out more why he's doing this, especially if you'll ever need a letter of recommendation. Maybe HR boneheadedly & wrongly feels you are exempt, but he knows you're non-exempt. Maybe he can't or doesn't want to pay you more than his PhD students, so compensates you with more their "lifestyle." etc. I suspect overtime work could end up severely curtailed once you raise the issue. So maybe you can subtilely ask third parties?
posted by jeffburdges at 11:52 PM on January 12

jeffburdges: What? If you worked 2 hours overtime, you'd only earn 1.5 x normal, or 1 hour uber secret vacation.

He's not getting paid straight time for the two hours of overtime and then three hours of vacation on top of that; he's getting paid NOTHING for the two hours of overtime work, so the three hours of extra vacation time covers both the standard wage and the overtime premium.
posted by jon1270 at 2:56 AM on January 13

If it's under the radar, it's probably fishy. The question is, do you care? If you trust your boss to be fair with these hours and you are allowed to use up your secret hours before dipping into your real vacation hours, it's possible that it works out better for you than the minuscule extra pay would.

Now, for the fun ethics of the situation. You are pretty sure they are doing something illegal, right? I think then it's your ethical duty to tell someone in the company HR department about it. Looking at it hyper-technically, not only is the company skirting their tax burden, but you are too. Being a weak person, I would of course report this anonymously. But letting it go because it benefits you now, and then reporting it in the end for the big payout seems a little shady to me. Report it now, or never.

Interesting. I used to work in a union position for a local government entity, and always got comp time at time and a half in lieu of overtime pay. I.e. If I worked 46 hours in a week, I got 9 hours comp time. It was standard practice for the whole department. I don't know if that was legal because it was part of the union contract or what, but there was never a whiff of it being anything other than aboveboard. What I had on the books was paid out when I left that job.

I think the union thing changes this- presumably, your union and the employer bargained this point and came to an agreement.
posted by gjc at 4:07 AM on January 13

Gingerbeer: rules are different for governments.
posted by dpx.mfx at 6:17 AM on January 13

I think the union thing changes this- presumably, your union and the employer bargained this point and came to an agreement.

CBAs can't contract for something that is illegal, though.
posted by Pax at 6:39 AM on January 13

You say HR doesn't know about this. So it's your boss who's doing something that is most likely illegal and definitely against company policy. When (not if) your boss gets fired, do you still think you're going to get this vacation pay?
posted by saffry at 2:59 PM on January 13