On May 2, 2017, by a vote of 229-197, the United States House of Representatives advanced a bill that would allow employers to offer compensatory time in lieu of cash compensation for overtime worked. This Act would amend the Fair Labor Standards Act (“FLSA”) and would offer private sector employers the opportunity to allow private-sector overtime-eligible employees to accrue up to 160 hours of compensatory time (“comp time”) in a year, at a rate of 1.5 hours for each hour of overtime worked (for hours worked beyond 40 a week). Lawmakers believe this Act will help employees balance the demands of family and work by giving them flexibility to earn paid time off. Currently, this option is only available to federal, state and local government employees.
How would this Act affect you as an employer?
Under this Act, an employer may offer to provide comp time off in lieu of cash payments for overtime only if the employer enters into a written agreement with the employee. The employee must voluntarily enter into the agreement and the employer must relay to the employee that electing to receive comp time off is not required and they can still elect to receive cash compensation instead. Your employee would be permitted to use the comp time within a reasonable period of time after the request so long as the comp time does not “unduly disrupt the operations of the employer.” Employees would also have the option to change their minds at any time and cash out their unused comp time and return to cash compensation for overtime. In order for an employee to be eligible under this Act, they must have worked at least 1,000 hours for the employer during a period of continuous employment with the employer in the 12-month period preceding the date of the written agreement. An employer would also have the option to instead pay out any accrued comp time to employees that exceeds 80 hours, so long as the employee is given at least 30 days notice. Similarly, the bill allows employees to elect to receive a payout for their accrued but unused comp time. Employers would have 30 days to pay out these requested payments.
What would this Act do to your bottom line?
If this Act passes the Senate and is signed by the President, the option to offer comp time off instead of paid overtime might lower your overtime costs and boost morale throughout your company. However, there are concerns that the Act may make employers more susceptible to lawsuits for wage violations and retribution claims. An employer who is found to have violated the Act is subject to penalties, including liquidated damages. The Act provides that employees can use their comp time within a “reasonable period,” which is so far left open to interpretation; employers need to make clear policies regarding employees’ requests for personal time off.
What should you do to ensure compliance if the Act is enacted into law?
While the Act does provide some guidance on how to implement its policies, it is important to consult with your attorney to ensure you do not open up your company to possible violations. You should also revise your employee agreements and manuals to properly and clearly state your policies for comp time. Additionally, in order to properly implement the Act within your company, you should meet with your Human Resources or Payroll department to ensure they are complying with the Act’s policies from an administrative standpoint. As an employer you will have to determine whether implementing this Act would be beneficial to your company or if the administrative and policy burdens would be too great. Just as no employee would be required to take paid time off, no business would be required to offer this benefit.
Is there anything I should be doing now?
The Act has only crossed the hurdle of being passed by the House. In order for the Act to go into effect, it must still be passed through the Senate and signed into law by the President. President Trump’s advisors have indicated that he will sign the bill if passed. If the bill passes, it will impact nearly every private employer. As an employer, you should be cognizant of the implications of the Act and keep up to date on its passage.
The information in this article is for informational purposes only and does not constitute formal, legal advice. Contact Danielle S. McKinley or another attorney at Roberts McGivney Zagotta LLC if you would like to further discuss whether offering comp time rather than overtime makes sense for your company and for recommendations to make sure your company properly complies with the Act if passed.