On May 8, 2013, the U.S. House of Representatives passed HR 1406, the Working Families Flexibility Act, which would allow employers to offer compensatory time off in lieu of time-and-a-half cash wages for overtime. Employees would be allowed to “cash out” unused comp time within specified periods of time. While the Society for Human Resource Management (SHRM) supports the bill, it is currently opposed by both unions and the majority of congressional Democrats, which means it will face a much tougher audience in the Democrat-controlled Senate.
Comp time under the Working Families Flexibility Act
The bill would amend the Fair Labor Standards Act (FLSA) to let private-sector employers offer compensatory paid time off to hourly employees who work more than 40 hours per week in lieu of cash wages at 1 ½ times their regular rate of pay. The comp time would be offered at a rate of 1 ½ hours per hour of overtime worked, and both the worker and the employer would need to agree in writing to the comp time arrangement. To be eligible for the comp time, an employee would have to have worked a minimum of 1,000 hours within the last 12 months. Employees could accrue up to 160 hours of comp time a year.
Employees would be permitted to use their accrued comp time upon request within a reasonable time, provided their use of comp time wouldn’t unduly disrupt the employer’s operations. Any unused comp time would be paid out in cash at the end of each year, and workers would be free to cash out their accrued comp time upon request.
Arguments for the bill
Supporters of the bill argue that employers in the public sector are free to offer workers comp time instead of cash payment for overtime and the rules in the private sector shouldn’t be different. One of the bill’s sponsors, Rep. Martha Roby (R-Ala.) has said it “is about helping working moms and dads, providing the ability to commit time at home.”
In a press release, SHRM praised the passing of the bill, calling it “an important step toward offering the flexibility” that employees need because they must “juggle many work-life responsibilities.” SHRM notes that comp time also would offer flexibility benefits for employers.
Concerns about the bill
Democrats have raised concerns that while the bill prohibits employers from coercing workers into taking comp time instead of overtime, it lacks a specific definition of coercion. Several amendments offered to protect employees from being coerced into taking comp time in lieu of overtime pay were defeated.
Labor unions have also voiced concern about the bill. In a press release, the AFL-CIO predicts that the law could be used to deny employees overtime, and therefore overtime pay, allowing them to earn only comp time. The union also claims the bill could encourage employers to demand longer hours because overtime is made less expensive, explaining “employers would be able to pay workers nothing at all for overtime work at the time the work is performed and could schedule comp time off at no extra cost to them (for example, during less busy periods when co-workers can pick up the slack).”
Further, the AFL-CIO argues that even if an employee were to choose to cash out comp time at the end of the year, that money has essentially been an interest-free loan to the employer since the time it was earned. Having that extra money on the books could provide an incentive for employers to push comp time on employees. Another concern is that employees could be forced to earn any paid time off instead of having employer provided vacation or sick days.
Bottom line
It is unlikely that private-sector employers and employees will have the option of comp time anytime soon. Even if the bill were to make it through the Senate, the White House has threatened veto it on the grounds that it would weaken FLSA protections for employees.
I spent many years managing in the public sector. Comp time is far from a panacea for employers. If an employee works an extra shift, they get 12 hours of comp time. In order to cover those 12 hours when that person uses the comp time you have to give the person covering 18 hours of comp time for working the extra 12 hours. It snowballs very quickly and feeds on itself. That’s why agencies that were short staffed and had minimum coverage requirements very quickly eliminated the use of comp time and paid out all the comp time balances. It can be useful to avoid paying incidental overtime if an agency is fully staffed, but if you are understaffed and requiring at least 1 overtime shift a week from all employees it becomes unworkable very quickly.
We’re also a public employer, and it works well for us – particularly for those hourly employees who must cover evening meetings. We have the choice of OT or comp time. Of course, ALL OT/comp must be pre-approved, and comp time must be used in a timely manner to avoid a large financial liability at the end of the year or if they leave. Most employees prefer the time off, understanding that it must be scheduled to not disrupt the function of our entity.
Our (private sector) employees are always asking if we will provide this “benefit”. It’s OK for public sector employees. But not for the private sector. Frankly, I don’t really think it benefits the employer that much; it’s more for the employee.