Question

If a union employee of a government entity (a fire dept.) works overtime he is paid time and a half for that overtime and therefore pays income taxe, medicare and social security tax on that extra income, not to mention the employer pays the extra matching social security. Now, what if that firefighter agrees to takes extra time off in lieu of taking the cash (i.e. work 24 hours overtime but take 36 hours of time off instead of cash) and this becomes the normal routine by contractual agreement, is there any liability to the firefighter or the City from a tax code standpoinnt? As I see it the federal governments might have issue with the loss of revenue? Is this considered bartering? and is it taxable? Furthermore, does it make any difference if the working of this unpaid overtime is mandatory and the firefighter MUST work it unconditionally? This is an actual scenario enacted because of the current economical crisis.