CLIENT ALERT

Background Information

Recently, representatives of the New Jersey Department of Labor (“NJDOL”) have taken the position that municipalities are no longer permitted to allow employees to earn and use compensatory time in lieu of overtime payments.  These representatives are basing this conclusion on the fact that the New Jersey Wage and Hour Laws were amended in 2019 to include local government employers within the definition of “employers” that are subject to the law. N.J.S.A. 34:11-56a1(g). The stance of these NJDOL representatives appears to be that because the State law makes no mention of compensatory time being permitted and only states that employees must be paid 1.5 times an employee’s regular hourly rate for each hour of working time in excess of forty (40) hours in any week, municipal employers are now prohibited from providing compensatory time in lieu of overtime, despite such practice being permitted under federal law. We disagree with this interpretation of the law.

Applicable Legal Standards

The ability for government employers to come to an agreement with employees to allow for the accrual and use of compensatory time arises out of the federal Fair Labor Standards Act (the “FLSA”), which states in relevant part:

Employees of a public agency which is a State, a political subdivision of a State, or an interstate governmental agency may receive, in accordance with this subsection and in lieu of overtime compensation, compensatory time off at a rate not less than one and one-half hours for each hour of employment for which overtime compensation is required by this section.

29 U.S.C. 207(a)(1). The only additional requirement under the FLSA in order for a public agency to provide compensatory time in lieu of overtime payments is that providing such compensatory time must be pursuant to either “applicable provisions of a collective bargaining agreement, memorandum of understanding, or any other agreement between the public agency and representatives of such employees” or, in the case of employees not covered by this sub-clause pursuant to “an agreement or understanding arrived at between the employer and employee before the performance of the work.” 29 U.S.C. 207(o)(2)(A).

DOL Position and Our Recommendation

The New Jersey Department of Labor is attempting to rationalize their position by saying that the “more stringent” law on the employer must apply when there is an apparent conflict between the State and Federal law. Setting aside the fact that the New Jersey and federal laws are not necessarily in conflict, the NJDOL’s interpretation ignores the fact that the accrual and use of compensatory time in lieu of overtime must be agreed to by employees or their representative and can actually be considered a benefit to the employee. Employees must agree to accrue this time that they can either use as additional paid time off, or be paid out for at the rate they earn at the time of payment, which may be an even higher rate than if they were paid when it was originally earned. 29 C.F.R. § 553.27.

Various unions in the State also disagree with the Department of Labor’s interpretation of the law. Moreover, we have reached out to legislators about this issue as well. Our advice at this time is to not change anything with respect to a municipality’s compensatory time practices and policies and/or applicable collective negotiation provisions and wait for any further clarification that may come in the future.

The information provided in this Client Alert is subject to revision and modification based on additional or updated guidance from the State of New Jersey. Please contact our office for any additional assistance you may require.