# THEATTORNEYG~CNERAL OF TEXAS
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August 26. 1974 The Honorable Robert S. Calvert Comptroller of Public Accounts State Finance Building Austin, Texas Opinion No. H- 382 Re: Application ofthe Fair Labor Standards Act of 1938. as amended, to state employees and related The Honorable James E. Peavy, M.D. Commissioner ofHealth Texas State Dept. ofHealth Austin, Texas questions.

Gentlemen:

This office has received requests for opinions from both ofyou concerning the application ofthe Fair Labor Standards Act of 1938. 29 U.S. C. 03201-219 (“FLSA”), as recently amended by the Fair Labor Standards Amendments of 1974.

The 1974amendments to the FLSA are the latest in a lengthy series offederal legislative enactments providing minimum wages and overtime compensation for a wide range ofworkers in the United States. In 1966. amendments to the FlSA extended this type of coverage to employees of hospitals, nursing homes or schools operated by states or political subdivisions, and to local transit operations.

By virtue of~the 1974amendments, 83(e) ofthe FLEA nowestablishes the coverage oftheAct to include most state employees. The definition of those covered ia:

Section 3(e)(2).In the case ofanindividual employed by a public agency, such term means . . .

. . .

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The Honorable James E. Peavy page 2 (H-382)

(C) any individual employed bya State, political subdivision ofa State, or aninterstate governmental agency, other than such anindividual

. . .

(i) who is not subject tothe civil service laws of theState, political subdivision, or agency which employs him; and (ii) who

. . . (I) holds a public elective office ofthat State, mlitical subdivision, or agency, (II) is eelected by theholder of such an office to be a member ofhis personal staff, (III) is appointed by such an office holder to serve ona policy making level. or (IV) who is animmediate advisor to such an office holder with respect to the constitutional or legal powers ofhis office. Section 7ofthe FISA provides that employers may not employ any covered .workef for’s ,work week:longer. thanforty ,ho\lr,aunless the employee is compensated for hir work in excess offorty.hours at a rate which is not leer than one and one-half times his **regular** rate ofpay.

Payment for overtime of state employees is provided for in the General Appropriations Act-+hich’:readsi ,. ‘
., . , ,::.
e. OVERTIME. In order to reimburse employees for work performed in excess ofthe working hours required byActs 1963, 58th Legislature, page 184, Chapter 104 (codified as Article 5165a. V.A. C.S.) it is required that compensatory time be granted at the rate ofl-1/2 times the overtime performed within the same month (pay period) that said overtime was accrued. In the case of

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. The Honorable Robert S. Calvert

The Honorable James E. Peavy page 3 (H-382)

hospital employees, said employees shall be reimbursed with compensatory time at the rate ofl-1/2 times the overtime accrued in excess of eighty (a hours over a fourteen (14)day consecutive period. This prbvision shall not apply to medical personnel and employees employed in a bona fide executive, administrative or professional capacity, including any employee employed in the capacity ofacademic administrative personnel or teacher in elementary or secondary schools. Compensatory time for those employees excepted from this provision shall be determined by theAdministrator ofthe agency or institution involved. Provided, however, that **any** agency or institution subject to the Fair Labor Standards Act, as amended, is authorized to reimburse employees for all authorized overtime by granting compensatory time as specified above or by paying money from funds appropriated by this Act at the rate ofl-1/2 times the **regular** rate for the overtime performed. (Acts 1973, 63rd Leg., **ch. 659,**  **Art.** V, 52(e), at p.2179). Comptroller Calvert’s queqtions are considered first. His first question is, “What ir the effective date ofthe 1974amendments to theAct which affect state employees??’ ,’

Section 29(a) ofthe 1974Amendments to the FLSA provides:

Except as otherwise specifically provided, the amendments made by this Act shall take effect onMay 1, 1974. Certain coverage provisions dohave different “effective” dates, (see G.a., the special treatment for public agency fire protection, andlaw enforcement activities set outin 5S7(k) and 13(b)(20) ofthe FLSA). The answer to the general question presented, however, is May 1, 1974.

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The Honorable Robert S. Calvert The Honorable James E. Peavy page 4 (H-382)

The Comptroller’s second andfourth questions are:

2. If a state employee, who performs work of such a nature as to be covered by the provision8 oftheAct’ works in excess of 40hours in onework week, is the employee entitled to overtime pay at the rate provided for in theAct? 4. Ifa State employee who peforms work ofsuch 

### anature as tobe covered by the provisions ofthe FLEA works 50hours in the first work week ofthe month andhis employer lays him off for 15hours during subsequent work weeks ofthe same pay period so that the employee is only paid his regular monthly salary (l/12 ofhis annual classified salary), has that employee received overtime pay as required by the Act or compensatory time as authorized by State Law? As provided in theAppropriations Act: state employees who are covered by theAct andwork more thanforty hours in a seven daywork week **accrue** overtime, and may be given overtime pay at the rate of one and one half times their regular pay rate, or. in thealternative, may be given compensatory time off at one and one half times theamount of overtime worked, if given during the same pay period (i. e., calendar month) in which the overtime was accrued.

We believe this procedure outlined in theAppropriation Act is consistent with the requirements offederal law. Opinion Letter No. 913, issued December 27, 1968. by theAdministrator ofthe Wage and Hour Division ofthe U.S. Department of Labor states: An employer may not credit an employee with compensatory time (even at a time and onehalf .rate) for overtime earned which is to be taken at some mutually agreed upon later date subsequent to the end ofthe pay period in which the overtime was earned, rather than pay cash for the .

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The Honorable James E. Peavy page 5 **(H-382)**

overtime as it is earned, However, it in permirsible for the employer employing one at afixed salary for a fixed workweek to lay off the employee a sufficient number of hours during some other week or weeks ofthe pay period to offset theamount of overtime worked (i. e. at the time and one half rate) so that the desired wage or salary for the pay period covers the total amount of compensation, including overtime. CCH Lab. L. Rep. (Nov. 1966- March, 1969)para. 30,924. And see, The Administrator’s Opinion Letter No. 868 (Oct. 18, 1968). CCH Lab. L. Rep. 11ul)ro para. 30,877.

Opinion Letter No. 913was approved in Brennan v. State ofNew Jersey, 364F. Supp. 156(D.N.J. 1973) (appeal pending) where the court made the following comment at page 158:

Infact, this is not really an exception to the rule of 57 oftheAct. but ia in complete compliance therewith. For exampl’e,, given a pay period oftwo weeks, with a fixed salary of $200.00 per week and a fixed work week offorty hours an employee works for fifty hours during the first week of the pay period. Under the above opinion letter, the employee may thenwork only twenty-five hours in the secondweek ofthe pay period (forty hours less time and one half for the tenhourr accrued overtime) while receiving his full gross pay of $400.00 at the end ofthe two week pay period. This would comply with §7oftheAct andthe accompanying regulations andinterpretations, since suchwages are paid both promptly and in cash. (Emphasis added) Brennan was shortly followed by Hodgson v. A. W. Crossley. Inc., 365F. Supp. 1131(S.D.N.Y. 1973). inwhich Brennan and Opinion Letter No. 913were cited with approval.

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Thus, the provisions ofthe FLSA pertinent to this inquiry have been construed bythe Federal Wage andHour Administrator and the courts as permitting, under certain conditions, the granting of “compenaation time” in lieu ofovertime wages. The answer to your second question, therefore, is that state employees, not excluded or exempted from the overtime provisions ofthe FLSA, are entitled to overtime pay at the rate provided in the FLSA, or compensatory time as discussed above.

The Comptroller’s third question is:

Ifyour answer toquestion number 2ir affirmative, may such overtime pay be paid byawarrant onthe State Treasury thmughthe classified salary fund ofthe employing agency? Attorney General Opinion M-1155 (1972) considered a virtually identical question. That opinion states in part:
**Your** . . . question brings into consideration 56of Article VIII ofthe Texas Constitution. That section provides that no money shall be drawn from the Treasury **but** in pursuance of specific appropriation made by law. In our opinion the necessary specific appropriation for overtime pay is provided by the same appropriation that provides for regular pay of the employee. The designad tion given this sum will nodoubt vary from institution to institution. Each employee’s warrant, including his overtime, should be charged tothat fund. See National Biscuit Co. v. State( 135S.W. 2d687, page 693 (Tex. Sup. 1940). wherein it was said:

. ‘As just stated, one ofthe provisions of 06 ofArticle 8of our Constitution requires all appropriations of money **out** of **the** State Treasury tobe specific. It

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The Honorable James E. Peavy page 7 (H-3821

is settled that noparticular form ofwords is required to render an appropriation specific within the meaning ofthe constitutional provision under discussion. It is sufficient if the Legislature authorizes the expenditure by law, and specifies the purpose **for** which the appropriation is made

. . . .’ Therefore, your third question is answered in the affirmative.

The Comptroller’s fifth question. asks: Are there any restrictions on state employers regarding lay off oftheir regular full-time employees?

No doubt your intention was to raise this question in light ofthe language ofOpinion Letter No. 913, supra.

Article 51658, V. T. C.S., establishes a basic forty hour workweek for state employees; however, it also states that:

. . . exceptions to the minimum length ofthe work week may be made bythe executive head ofa state agency to take care ofany emergency or public necessity thathe may find to exist. We believe Article 516hmurt be read together with the General Apprbpriation Act provisions relating to the granting of compensatory time. Clearly, the Legislature there provides just the sort ofprocedure Opinion Letter No. 913and Brennan describe as being in compliance with the FLSA overtime requirements. We note that the alternative “compensatory time” procedure, provided for in the General Appropriations Act, could only be implemented by the state agency/employer “laying off ” the state employee (that is, causing anabsence from the **work** place and from actual work) for cl.=-ppropriate number ofhours during the same pay period the overtime was accrued.

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The Honorable James E. Peavy page 8 (H-382)

The answer to your fifth question is, therefore, that the only restriction on “laying off ” employees (in the sense of FLSA compliance and consistent with the requirements of theAppropriations Act) is that the “lay off

” take place during the same period in which overtime accrues. The Comptroller’s sixth question **asks:**

Ifa state employee is terminated with overtime accrued after May 1.1974, must his final salary warrant include pay at the rate specified in the Act for such overtime?
**We** assume you intend to limit this inquiry to FLSA “covered” employees. Attorney General’s Opinion M-1155, supra. considered a rimilar question, and concluded as follows:.

. . . **Your** question asks whether **you** have **authority** toinclude payment for authorized overtime properly accrued at the time ofdeath or separation **of** the employee from employment with the department. Overtime pay is not a separable stipend, It is part and parc’el ofthe compensation called for in the employee’s contract, and is properly payable, if accrued, at the time the base pay is paid. The employee has avested right in overtime pay the moment it accrues under his contract of employment. Therefore, your question is answered in the affirmative. The Comptroller’s seventh question is in two parts, the first part reading as follows:

May a state employee covered by theAct choose to receive compensatory time in the same pay period in which the overtime is worked?

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The Honorable James E. Peavy page 9 **(H-382)**

As discussed in answer to your second and fourth questions, the granting of compensatory time within the same pay period in which the overtime is accrued or thepayment of overtime wages is permissible at the discretion ofthe employer. The FLSA does not grant state employees discretion in this area as a matter of right,

The second part ofquestion seven asks:

May a state employee covered by theAct choose to receive compensatory time in subsequent pay periods for overtime worked? As indicated in answer to the Comptroller’s second andfourth questions, granting of compensatory time in subsequent pay periods for overtime worked is not permitted by the FLSA.

In a separate request the Comptroller asked two questions relating to the Teacher Retirement System. They are:

Is there pre-existing law for an agency of **the** State to pay overtime from trust funds when such agency comes under the Federal Fair Labor Standards Act as that **Act** was amended effective May 1. 1974? Is the department legally authorized to issue warrants in payment ofthis overtime payroll when paid from trust funds with the Stats Treasury and not in the State Treasury? Section 3.59 (j), Vernon’s Texas, Education Code, provides in part:

.’ The rate of compensation ofall persons employed by

the State Board of Trustees, as well as the amounts necessary for other expenses for the operation ofthe retirement system. shall be approved by the State Board of Trustees, provided they shall be nogreater

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The Honorable James E. Peavy page 10 (H-382)

than tho*e for similar rervices performed for the State of Texas. We believe this provision along with the requirements ofthe FLSA provide ample pre-existing law to permit the payment ofovertime from trust funds. Attorney General Opinions M-1155 (1972), M-341 (1969). Therefore your office is authorized toissue warrants for that purpose.

Dr. Peavy’s que*tion is:

May the fees collected for overtime and special services pursuant toArticle 4476-7 be used to pay overtime wager: to meat inspectors in carrying out their duties pursuantb the State Wholesome Meat and Poiiltry Act? The answer toyour question is affirmative. The Texas Meat and Poultry Inspection Act (Article 4476-7. V.T. C.S.) provides for examination andinspection of meat animals before entering slaughter houses, for post-mortem examinations andinspections, and related regulatory provisions, including making investigations ofdisease findings. Section 410 of Title III ofArticle 4476-7 authorizes **the** Department ofHealth, as you point out, to collect fees for overtime worked and special services rendered to regulated establishments, and the current General Appropriations Act, at page 1822, “Department ofHealth, ” provides a* follows:

Any fees collected for overtime or special services under Senate Bill No. 28, Sixty-first Legislature, are hereby appropriated for the biennium beginning Segtember 1, 1973for the enforcement ofSenate Bill No. 28. (Emphasis added) - We conclude that the overtime worked bymeat inspectors in connection with their regulatory activities would necessarily be performed aa part of the enforcement ofArticle 4476-7 (being Senate Bill No. 28, 61st Legirlature); thu*, the described fees collected are appropriated for the

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The Honorable Jamen E. Peavy page 11 **(H-382)**

payment of ruch overtime wages. SUMMARY 1. The effective date ofthe Fair Labor Standards Amendments of 1974is May 1. 1974. 2. State employees, covered by the overtime provisions ofthe Fair Labor Standards Act of 1938, as amended, may be given overtime pay or compensatory time off, if compensatory time off is given in the same pay period the overtime is accrued. 3. Overtime pay may be paid byawarrant onthe State Treasury through the classified salary fund ofthe employing **agency.** 4. If a state employee covered bythe overtime proviaions of FLSA and FLSA 1974is terminated with over-’ time accrued, his or her final salary warrant must include the FLSA overtime pay. 5. A state employee, covered by the FLSA overtime provisions, has no legal right to insist on receiving overtime wage* where that employee is given compensatory time off during the same pay period the overtime was accrued; nor does that employee have discretion to receive compensatory time in subsequent pay periods for overtime worked. 6. There is pre-existing law for a state agency to pay overtime wages from trust funds. 7. Fees collected from regulated institutions for overtime worked by meat inspector*, pursuant to

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The Honorable James E. Peavy page 12 (H-382)

Article 4476-7, V. T. C.S., may be used to pay overtime wage* tothose meat inspectors. Very truly yours,

Attorney General of Texas APPRXX’ED:



# . . -i -3bh.+& DAVID M. KENDALL, Chairman Opinion Committee 

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