Witnesses Debate Bill Trading Overtime Pay for Comp Time

Payroll on Bloomberg Tax is built to get you to the right answer faster and more efficiently. Get all the payroll intelligence you need with Bloomberg Tax expert analysis, perspectives and...

By Christine Pulfrey

The flexibility associated with allowing voluntary paid time off in lieu of wages as compensation for overtime hours worked would greatly and primarily benefit employees, claimed several witnesses at an April 5 hearing on a bill that would provide just such comp time.

Another witness, who testified to the Subcommittee on Workforce Protection, countered that employers would be the primary beneficiaries of the Working Families Flexibility Act ( H.R. 1180 ), which would undercut the Fair Labor Standards Act's worker protections and let employers defer comp-time payments for up to 13 months, essentially providing employers an interest-free loan on money owed to workers.

The Fine Print

Among the provisions of the measure, which was introduced Feb. 16, 2017, by Rep. Martha Roby (R-Al), employees could choose, in place of overtime wages, to accrue up to 160 hours of paid time off in a 12-month period at a rate of at least one and one-half times the hourly rate for each hour of overtime worked.

At the end of a designated 12-month period, unused comp time must be converted to overtime wages within 31 days to be paid at the regular rate received by the employee when the time was earned or the final regular rate received by the employee, whichever is higher.

Employees would be allowed to use the compensatory time with reasonable notice when it was not a disruption to the operations of the employer, the measure said.

With 30 days’ notice, employers could cash-out employees’ comp time in excess of 80 hours or discontinue its comp-time policy. Similarly, with 30 days’ notice, employees could opt out of the policy.

Versions of the legislation introduced in the past 20 years in the U.S. House of Representatives, including H.R. 1 in 1997, H.R. 1119 in 2003, H.R. 6025 in 2008 and H.R. 933 in 2009, failed to become law.

Morale-Boosting Incentive

A complex American workforce faced with global competition in a 24/7 economy requires more workplace flexibility, including paid leave and flexible work options, said Crystal Frey, vice president of human resources at Continental Realty Corporation in Baltimore, Md., appearing on behalf of the Society for Human Resource Management. Despite dramatic changes that have occurred in where, when and how work is done, the FLSA has remained relatively unchanged in the nearly 80 years since its enactment, she said.

The bill would give employees greater flexibility, improving morale and job satisfaction and increasing productivity by letting them accrue and take paid time off when they need it, Frey said.

The bill also would help private-sector employers become more competitive with federal employers for top talent by availing them of an option that has been available to public employers since the Federal Employees Flexible and Compressed Work Schedules Act was made permanent in 1985, Frey said.

Smoke and Mirrors

“There is no question that lawmakers must update our workplace policies to meet the needs of 21st century families, but H.R. 1180 would be a giant step in the wrong direction,” said Vicki Shabo, vice president at the nonprofit, nonpartisan National Partnership for Women and Families. Also, “it sets up a false dichotomy between time and money when people urgently need both, the FLSA allows both and research shows that employers benefit from both.”

The bill “makes it cheaper in the short term for employers to provide comp time than to pay overtime wages, so they’ll have every reason to hire fewer people, relying on them to work more hours, meaning more time away from their families, with the promise of future comp time,” she said.

Because comp time requests must not unduly disrupt employer operations, the bill does not guarantee that the time can be used when needed. For example, workers could not be guaranteed the use of comp time saved up for the birth of a child because “babies always disrupt, arriving at a certain time,” Rep. Carol Shea-Porter (D-N.H.) said. “It is that ‘subject to’ part that’s really awfully difficult, isn’t it? Because what happens, I know from small businesses, is that there’s never a good time for anybody to not show up.”

Exploring Options

“How about a compromise?” Shea-Porter asked, but witnesses were noncommittal on whether employers that cash out comp time would be willing to pay interest on amounts held up to 80 hours or would be willing to honor at least 75 percent of comp-time scheduling requests.

Working families need a suite of policies, Shabo said, such as the Healthy Families Act ( H.R. 1516 / S. 636 ), which makes paid sick days available and builds on laws in seven states; the FAMILY Act ( H.R. 947 / S. 337 ), which would create a national paid family medical leave fund modeled on programs in California, Rhode Island, New Jersey and soon New York and the District of Columbia; expanded access to the Family and Medical Leave Act; and the Schedules That Work Act, which encourages predictable schedules.

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Payroll