The days are getting longer and the vacation requests are piling up. If your agency uses compensatory time off, or “CTO,” granting vacation requests can be tricky when everyone wants to take time off at the same time.

What is CTO?

The Federal Labor Standards Act (“FLSA”) requires employers to pay employees at least 1.5x the employee’s regular rate of pay for overtime hours worked. Alternatively, the FLSA allows public employers and employees to agree on a different method of compensation: CTO. Instead of paying 1.5x the regular rate of pay for overtime hours worked, public employers can instead provide employees with time off work at 1.5x their overtime hours worked.

Using CTO is quite different from using regular vacation leave. For vacation leave, employers may typically approve or deny an employee’s request subject only to conditions in the employer’s personnel rules or applicable memoranda of understanding.

For CTO, agencies must be familiar with two standards: (1) “reasonable period” and (2) “undue disruption.”

A “reasonable period” considers the “customary work practices within the agency based on the facts and circumstances in each case.” The FLSA regulations provide four non-exhaustive factors that could contribute to the analysis: (1) the normal schedule of work; (2) the anticipated peak workloads based on past experience; (3) emergency requirements for staff and services; and (4) availability of qualified substitute staff. For represented employees, the agency should strongly defer to the MOU’s provisions on CTO to determine what is reasonable, if applicable.

If the agency cannot provide a reasonable period of time in which the employee can use CTO, the agency must be able to justify its decision by showing undue disruption. “Undue disruption” is an unreasonable burden on the agency’s ability to provide services of acceptable quality and quantity.

Typically, showing undue disruption is a difficult task. Undue disruption is more than a mere inconvenience, and there is some authority that even having to hire replacements—by itself—does not establish undue disruption.

Save the Date

The Department of Labor (“DOL”) maintains its “longstanding position that employees are entitled to use compensatory time on the date requested absent undue disruption to the agency.”

In contrast, the Ninth Circuit held in 2004 in Mortensen v. County of Sacramento that the FLSA does not require employers to approve an employee’s specifically requested CTO date. Instead, once an employee requests CTO, the agency has a reasonable period of time to grant the request.

The Ninth Circuit declined to defer to the DOL’s interpretation  because it concluded that the text of the FLSA “unambiguously states that once an employee requests the use of CTO, the employer has a reasonable period of time to allow the employee to use accrued time.” Thus, employers may provide a reasonable period of time in which the employee can use CTO, without showing that the employee’s specifically requested date would cause undue disruption.

The Ninth Circuit’s decision in Mortensen remains unchallenged in this jurisdiction, and the Supreme Court has not reviewed the issue. Accordingly, California agencies are likely able to follow Mortensen’s decision and provide employees with a reasonable period of time in which they can use CTO instead of approving the employee’s specifically requested date.

A reasonable period of time, as mentioned previously, may depend on several factors, such as the agency’s practice of approving time off requests. In Mortensen, for example, the County of Sacramento had the following “leave book” policy: If the CTO request falls on a date for which all the leave openings are full, the County denies the CTO request. The employee may select any other day with a leave opening, up to one year. If the employee has not used their CTO within a year, the County cashes out the CTO.

The Ninth Circuit held that this policy complies with the FLSA, even though the “reasonable period” may theoretically last for up to one year. The Court observed that the County used this same policy for all leaves and the employee’s bargaining unit assented to the policy under the MOU.

In sum, when an employee requests to use their accrued CTO, the agency must grant the request to use CTO within a reasonable period unless the request will unduly disrupt the agency’s operations. That is, the agency is not required to grant a request to use CTO on a specific date. However, the employee must be able to use the CTO within a reasonable period, which depends on several factors mentioned above. Otherwise, the agency must be able to show that allowing CTO use within a reasonable period would unduly disrupt the agency’s operations.