Are you in FLSA compliance with sick time buy-backs?

Here’s a story about an employer that got burned with FLSA overtime rules when it tried to reward workers for good attendance.

The employer launched a sick-day “buy-back” program. Here’s how it worked: At the end of the year, eligible workers could cash in their unused sick time for 75% of their regular pay.

In Recognition of Services

Employees eagerly cashed in their sick time – and showed their appreciation by filing a lawsuit alleging FLSA overtime violations. The workers claimed the unused sick days should count toward overtime.

A court sided with the workers. The judge noted that when payments are made to employees who use sick days, those days should not be counted when calculating overtime.

However, when employees get paid for an unused sick day – the courts call it pay “in recognition of services performed” – the employer must count that day when calculating overtime pay.

That kind of bonus is not like getting paid for being absent (like a sick day). Rather, it is pay for work that is already done. That’s why employers should count it toward overtime.

If you want to try this approach, keep in mind: If you buy back an unused sick day, you must count that day toward overtime pay. But if you award a bonus for “good attendance” or “employee of the month,” you do not have to count that bonus in your overtime calculations per FLSA overtime regs.

Cite: Acton v. City of Columbia, U.S. District Court, Western District, MO, 2004.

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