Comp Time in the Private Sector: New Legislation Makes it a Real Possibility

By:  Miriam L. Rosen

After months of uneasy anticipation in 2016 about the new Fair Labor Standards Act (“FLSA”) overtime rule, employers can now anticipate a much different type of change to the FLSA.    On May 2, 2017, the U.S. House of Representatives passed the Working Families Flexibility Act (the “Act”).  As the name implies, the Act would provide employees (those with families and those without) with workplace flexibility by allowing the accrual of compensatory time off in lieu of overtime pay under the specific parameters of the Act.

The Act would amend the FLSA to allow private sector employers to offer non-exempt employees the choice between cash payment for hours worked over 40 in a work week or the accrual of an hour and one-half of compensatory time (“comp time”) for each overtime hour worked.  For example, an employee who works 45 hours in a work week could choose between 5 hours of pay at 1.5x their regular rate or 7.5 hours of paid time off in their comp time bank.  Under the Act, employees could accrue up to a maximum of 160 hours of comp time annually.

The Act does have restrictions intended to protect both employees and employers from the unintended “benefits” of such flexibility.  The Act provides that comp time accrual would only be available to employees who have worked at least 1,000 hours in a 12 month period before they could agree to a comp time arrangement.  The employer and employee would have to agree in writing to the comp time arrangement before any time could be added to the comp bank.  In addition, an employer could not coerce an employee into taking comp time.  Employers would also be prohibited from retaliating against employees based on the decision to use comp time.

Significantly, if the arrangement is revoked by either party, the employer would have to pay out the unused comp time.  Further, any unused comp time at the end of the calendar year (or another year designated by the employer) would be paid out at the employee’s regular rate when the comp time was accrued or the employee’s current regular rate, whichever is higher.

In terms of use of comp time, the Act provides that if an employee asks to use accrued comp time, the employer must grant the request “within a reasonable period” after the request as long as doing so will not “unduly disrupt the operations of the employer.”  What will “unduly” disrupt operations certainly seems to be an area that could cause friction between employees and managers.

While government employees have long had the ability to choose between accruing comp time and payment of overtime, the Act has received vastly different responses across the political aisle. Noting that the intent of the Act is to give employees choice about the use of their time, Rep. Bradley Byrne (R-Ala.), one of the Act’s co-sponsors, remarked that “[p]olicies written in the 1930s that are out of step with the needs of the 21st century workforce shouldn’t stand in the way of flexibility for workers and their families.”  In contrast, Rep. Bobby Scott (D-Va.), an opponent of the legislation, noted that “[m]ost employees can already take time off without pay. The bill does, however, create a new right for employers to withhold employees’ overtime pay.”

So, what’s the next step for this legislation?  A Senate version of the Act is currently under review by the Health, Education, Labor and Pensions Committee.  How long it will take the Act to work its way through the Senate is hard to tell.

The Working Families Flexibility Act is an opportunity to give workers in the 21st Century added flexibility in a way that was never contemplated when the FLSA was passed almost 80 years ago.

This article was written by Miriam L. Rosen, who is a member of the Legal Affairs Committee of Detroit SHRM and Chair of the Labor and Employment Law Practice Group in the Bloomfield Hills office of McDonald Hopkins PLC, a full service law firm. She can be reached at mrosen@mcdonaldhopkins.com or at (248) 220-1342.

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