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Wage PaymentFair Labor Standards ActOvertimeFeaturedJune 14, 2013by Stanton LawComp Time for Private Sector Employers: Not Yet, But Maybe Soon

The practice of awarding “comp time,” i.e. paid time off in lieu of wages for hours worked in excess of 40, is not currently permitted for private-sector employers. As the Fair Labor Standards Act is currently written, employers must pay employees wages at a rate of 1.5 times their regular rate for all hours over 40 in a week, regardless of an employee’s preference or agreement to take leave instead.

The Working Families Flexibility Act (H.R. 1406), which narrowly passed in the House of Representatives May 8th, would give employers the chance to offer comp time instead of cash overtime payments, a benefit already available to public-sector employees. The bill is generally supported by the business community, but presents both advantages and drawbacks for employers.

Under the proposed law, employees could elect to receive paid time off at a rate of 1.5 hours of leave for every hour worked in excess of 40, which they would agree to in writing.  Employees could not be forced to accept comp time in lieu of cash for overtime, and the bill includes an anti-retaliation provision to prevent employers from favoring employees who elect comp time over those who do not.

Employees electing comp time would be eligible to accrue up to 160 hours a year, which they could take “within a reasonable period” so long as they don’t “unduly disrupt” operations. Employees would also be eligible to cash out accrued comp time at any time during the year upon 30 days notice.

Supporters of the law emphasize the significant flexibility comp time would afford workers with small children or aging parents to attend to familial obligations without exhausting other available leave.  They also cite the increasing value workers place on free time, the availability of which could boost employee morale. The bill also comes at a time when businesses are still extremely cost-conscious, and implementation of a comp time policy could undoubtedly relieve the burden of overtime payments each pay period.

The bill is not without detractors, many of whom are concerned about employees feeling pressure from employers to take comp time, the impact on collective bargaining, and what some predict as the inevitable pay disparities that will emerge as women, the primary care takers in many families, elect to receive comp time at higher rates than their male counterparts, consequently taking home smaller weekly paychecks.

Businesses wary of the new law raise the point that given the automatic annual cash-out provision for unused, accrued comp time, in the long run employers’ payroll costs will be the same, but may become less predictable. Large cash-out requests could equal up to six weeks of an employee’s regular pay, the timing of which would be in the discretion of the employee.

Further, employees will be eligible for up to an additional month of leave, which could significantly impact productivity, especially if those employees have been logging long hours at work.  How much discretion employers would have in approving the timing or duration of comp time absences is unclear, and could become source of contention between employees and managers. Finally, the bill as currently written would “sunset” after only five years, making investment in implementing and administering this admittedly tricky benefit a bit of a gamble.

The idea of private sector comp time has been proposed several times in recent years, and appears to be gaining ground in 2013. H.R. 1406 still faces many hurdles before becoming law, however, so for now employers should assume that time off is not an acceptable substitute for overtime pay.