Overtime Pay Taken as CTO Can Be Abused by Employers
Compensatory Time Off is Often Misunderstood or Abused by Employers
Fictional Background
Mary worked one year working as an intern in California. The contract specified a rate per hour and gave Paid Time Off [PTO. ] Mary did not use her PTO, but relied instead on “Compensatory Time Off” [CTO], that is, she took time off in lieu of overtime pay.
At the end, Mary was told she would not be paid her PTO because of a ‘use it or lose it’ policy. Her employer told Mary that PTO granted was not a ‘policy’ of the company, but a ‘component of the internship.’ That sounded strange to Mary.
The “intern” contract also stated that Mary was overtime exempt, and would not be paid overtime.
Mary wanted to know: Did her international student intern status make any difference to her rights to PTO?
Legal Analysis
PAID TIME OFF IS DUE AS WAGES EARNED.
Paid Time Off [PTO] is the equivalent of wages earned, and must be paid immediately on termination of employment. PTO can be capped, but it cannot be forfeited — i.e., the “use it or lose it” policy is illegal in California.
COMPENSATORY TIME OFF MUST MEET STRICT CALIFORNIA STANDARDS.
Compensatory Time Off [CTO] must meet California conditions: Labor Code Section 204.3:
— The employee requests CTO, in writing, in lieu of overtime.
— The employee is regularly scheduled to work no less than 40 hours in a workweek.
— There is a written agreement for CTO before the work is performed.
— Accrued CTO must be paid out when the employee terminates employment.
Note also that the CTO is to be given not just for the hour worked over 8 in a day, but at the overtime rate of time: 1 hour worked = 1.5 hours off up to 12 hours, and 2 hours off over 12 per day.
INTERNS ARE PERSONS IN TRUE LEARNING ROLES WITHOUT PRODUCTIVITY DEMANDS.
A true intern, usually as part of an academic requirement and approved sponsorship, is unpaid. As an intern, Mary’s work duties are under continuous mentoring and supervision, with no discretion to decide matters of significance to the company. Bottom line: Mary is non-exempt. Mary should demand her overtime and money equivalent of unused CTO. She likely has a claim for the extra 1/2 hourly rate even for each hour she was allowed to take off at base hourly pay.