Here’s one you’ll want to mention to your CFO and the people in Payroll.

If your company tries a leave buy-back – in which employees “sell” unused sick time to the company – you could end up with a violation of federal overtime laws, depending on how you carry it off.

One employer got caught in such a mess when workers who took part in the buy-back then sued, saying the dollars should have been figured into calculations for overtime.

And the employees won the case.

Part of an ongoing program

The key to the case: If the buy-back is part of a structured, set program with a formula for computing the amount each employee gets, the money is considered a nondiscretionary bonus.

That means it has to be included in the OT-pay calculation.

Can you avoid getting burned?

Can an employer have a buy-back program without getting burned by the OT laws? It’s possible if:

• The buy-back isn’t part of a structured, standard end-of-year program, but instead is set up as a one-time thing done at the discretion of the employer, and
• Similarly, the amount and rate of the buy-back aren’t based on a standard formula used year after year.

Cite: Acton v. City of Columbia