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