In 1938, the Fair Labor Standards Act (“FLSA”) implemented basic wage and hour protections in the form of a 40-hour standard workweek and employee entitlement to one-and-a-half times their regular rate for hours worked beyond that. What the FLSA does not touch, however, is a subject that both employers and employees care about almost as much as compensation: paid time off.
Introduced by Representative Martha Roby (R-Ala.), the Working Families Flexibility Act of 2017 (H.R. 1180), looks to fill that hole by giving employers and employees the option to agree to substitute paid time off for overtime wages. The bill was passed by the House on May 2, 2017, by a recorded vote of 229 to 197, and moved on to the Senate for further debate. Whether it will survive the Senate remains to be seen, but President Trump has pledged to sign it if it makes it to his desk.
So how would the Working Families Flexibility Act affect employers? As its name implies, the legislation would let employees choose to spend more time with their families by electing to receive compensatory time off as payment for overtime work in lieu of traditional overtime compensation. Like the overtime pay Americans have known for nearly 80 years, this compensatory time off would accrue at the same time-and-a-half rate up to a maximum of 160 hours. Employees would then have the ability to use that time for any reason – e.g., to care for a sick child, take a longer vacation, or enjoy one more family beach day before school starts – and the employer would be required to pay out any unused accrued time at the end of each year. The employer would also have the option of paying out any unused accrued time in excess of 80 hours after providing at least 30 days’ notice, while employees would have the ability to request a payout of their accrued comp time within 30 days. To implement this arrangement, the employee and employer would have to enter into a written agreement before the employee performed the overtime work. This agreement, however, could be withdrawn by the employee “at any time” and by the employer with 30 days’ notice. Furthermore, the bill would provide employees with protection from intimidation, threats and coercion by employers looking to interfere with their rights to request or not request comp time, or to require employees to use it. Any employer in violation of these protections would be liable for double damages.
Of course, these very basic provisions would likely be developed further through regulations issued by the Department of Labor. But even as presently written, they have already been the subject of vigorous disagreement. Representatives against the bill argue that it would take away the longstanding security of receiving fair pay for overtime work by ultimately providing less pay to those who choose compensatory time. They also argue that the bill would in fact result in less family time by leading to less predictable work schedules and an overall increase in worked overtime hours. Finally, opponents argue that employers would ultimately reap the greater benefit because they would have the discretion to decide when earned compensatory time could be used, a power that could be used to effectively cheat employees out of their comp time altogether. For these reasons, opponents are calling attention to other options they claim would provide a greater benefit to employees, such as increasing the federal minimum wage and allowing for more control over schedules. Proponents of the legislation respond by pointing out that government employees have had the benefit of this option since 1985.
So would H.R. 1180 be a good thing or a bad thing for Massachusetts employers? On the one hand, employers who decide to offer the option of compensatory time would be opening themselves up to some pretty big unknowns – e.g., how many employees will opt for earned comp time, when and how will they try to use their time, will they seek payment of wages instead, etc. – as well as new grounds for interference and retaliation claims that carry mandatory double damages. On the other hand, the bill does not require employers to do anything different at all – they would be free to continue to pay overtime compensation as they have been doing and remain in compliance with the requirements of the FLSA. Additionally, the flexibility inherent in the legislation – including the ability for employers to prevent the use of comp time when it would be “unduly disruptive” to the employer’s operations – may make it an appealing option for employers whose workforces work significant overtime. And if an employer tried a comp time system and decided it was a bad idea, they would be free to rescind the system with just 30 days’ notice.
It is impossible to know whether H.R. 1180 will pass the Senate and land on President Trump’s desk, or what the DOL’s regulations might look like, but in the meantime, employers may wish to start thinking about whether an earned compensatory time option would be right for their business.