Must Churches Pay Accrued “Comp Time”?

A New York court addresses an important question.

Church Finance Today

Must Churches Pay Accrued “Comp Time”?

A New York court addresses an important question.

Background. Many churches have implemented “comp time” arrangements as a way to avoid paying overtime compensation to hourly employees who work more than 40 hours in one week. Instead of paying employees overtime compensation at a rate of one and a half times their normal rate of pay (“time and a half”) for hours worked in excess of 40 in the same week, the employer “contributes” the excess hours to a “comp time account.” Employees who work less than 40 hours in a week can draw upon their accumulated comp time so that they receive their normal paycheck for 40 hours of work.

Example. A church implements a comp time arrangement. Bill, an hourly full-time employee, works 50 hours for 10 weeks in 2000, accumulating 100 hours of comp time. The church only pays Bill for 40 hours of work during the weeks in which he worked 50 hours. He was not paid overtime compensation at a rate of one and a half times his normal hourly rate of pay for the hours worked in excess of 40 in any week. Bill takes a day off during the first week of April 2001, and asks to be paid for a full 40-hour week by drawing 8 hours from his comp time account. The church complies with this request.

A question that sometimes arises is a church’s legal obligation to pay accrued comp time to employees upon the termination of their employment. A recent New York case addresses this issue directly.

Facts of the case. A woman was employed as the director of a church’s child care program for 13 years. Upon her death, her husband asked the church to pay him his wife’s accrued comp time, which he claimed amounted to $71,000. He also asked the church to pay him his wife’s accrued vacation time, which he claimed amounted to $38,000. When the church rejected both requests, the husband sued the church. A trial court awarded the husband only $11,000 in accrued vacation time pursuant to a provision in the church’s employee handbook which permitted the accrual of only 40 days of vacation time. The court awarded the husband no accrued comp time, since the church’s employee manual did not address comp time. The husband appealed.

The court’s ruling. A state appeals court began its opinion by noting that the church’s employee manual authorized the payment of only 40 days of accrued vacation time ($11,000 in this case) and did not authorize the payment of any accrued comp time. Therefore, since the husband’s demands for accrued comp time and more than 40 days of accrued vacation time were

not based upon the existence of a written contract of employment, to be successful [he] must establish that, upon termination, [the church] had a regular practice of paying its employees accumulated and unused vacation and compensatory time and that [the deceased employee] relied upon such practice in accepting or continuing her position as executive director.

Did the church have a “regular practice” of paying accrued vacation time in excess of 40 days, and accrued comp time? No, concluded the court. It acknowledged that the church “on rare occasions” had paid accrued comp time, and accrued vacation time in excess of 40 days. But such evidence did not establish a regular practice. Further, while the husband provided the court with the affidavits of 3 employees who claimed that it was their understanding that there was no limit on the amount of comp time or vacation time that could be accrued, this evidence failed to prove that the child care director relied on such a perceived practice in accepting or continuing her employment. As a result, the appeals court agreed with the trial court that the husband was entitled to no more than the $11,000 allowed by the employee manual.

Significance to church treasurers. Consider the following points:

1. Liability for accrued comp or vacation time. This case demonstrates that a church may not be legally obligated to pay accrued comp time or vacation time unless (1) specifically authorized by a “written contract” such as an employment contract or an employee manual, or (2) the church has a regular practice of paying accrued comp time or vacation time, and an employee proves that he or she relied upon that practice in accepting or continuing employment.

2. Violation of federal law. Of course, if a church refuses to pay comp time to an hourly employee, then this means that the church may have violated the overtime pay requirements of federal law (the Fair Labor Standard Act) by not paying the employee “time and a half” for hours worked in excess of 40 during the same week. If the church is subject to the overtime pay provisions of federal (or state) law, then it may be liable for unpaid overtime plus penalties and interest.

Key point. Comp time arrangements expose churches to potentially substantial liability, and should not be used without the advice of an employment law attorney.

Resource. Are churches subject to federal overtime law? This question is addressed fully in section 8-17 in Richard Hammar’s book, Pastor, Church & Law (3rd ed. 2000), which is available from Christian Ministry Resources by calling 1-800-222-1840,

3. Comp time arrangements no exception to overtime pay requirements. Federal law does not recognize comp time arrangements as an exception to an employer’s obligation to pay overtime compensation (with the exception of some government agencies).

4. An exception. Comp time arrangements during the same pay period are allowed. For example, a church can allow hourly employees to work more than 8 hours on some days and less than 8 hours on other days during the same pay period, so long as employees do not work more than 40 hours during a week.

This content originally appeared in Church Treasurer Alert, April 2001.

Richard R. Hammar is an attorney, CPA and author specializing in legal and tax issues for churches and clergy.

This content is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. "From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associations." Due to the nature of the U.S. legal system, laws and regulations constantly change. The editors encourage readers to carefully search the site for all content related to the topic of interest and consult qualified local counsel to verify the status of specific statutes, laws, regulations, and precedential court holdings.

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