May 04, 2017

Time or Money? House Passes Bill to Extend "Compensatory Time" Option to Private Employers

Reviving past failed attempts to change federal overtime law, the House passed a bill on May 4, 2017, that would permit private sector employers to offer days off in lieu of earned overtime.

The Working Families Flexibility Act (WFFA) would change the Fair Labor Standards Act to allow nonunionized, non-exempt employees who have worked at least 1,000 hours in the last year at their current employer to use “compensatory time” instead of receiving overtime wages for working more than 40 hours in a week. Supporters of the WFFA promote the bill as a way to provide employees more flexibility to choose either overtime compensation or time off as their payment for overtime hours. However, opponents of the WFFA are concerned that it gives employers too much control as to when and how the time off will be granted and that it grants employers an interest-free loan while it waits for employees to elect to use the earned compensatory time.

Key Provisions of the WFFA

  • The employee and employer must agree that electing compensatory time is an option, and the employee may withdraw his or her consent at any time.
  • Employees can accrue up to 160 hours of compensatory time.
  • Employees earn compensatory time at a rate of 1.5 hours for each hour worked above 40.
  • The employer must grant the employee’s request to use his or her compensatory time, provided: (1) the request for compensatory time is made within a “reasonable period” and (2) granting the request would not “unduly disrupt” the operations of the employer.
  • The employer must pay out any unused compensatory time: (1) within 31 days after the completion of a company-determined 12-month period, (2) within 30 days of receiving a written request from the employee requesting monetary compensation for the compensatory time or (3) upon the employee’s termination.
  • The employer may reimburse employees for accrued compensatory time in excess of 80 hours upon providing 30 days’ notice.
  • When paying for unused compensatory time, the employer must pay the employee for each unused hour at whichever wage rate is higher: (1) the rate the employee earned at the time the compensatory time was worked; or (2) the rate the employee earns at the time the payout request is made.
  • Employers can discontinue the compensatory time program with 30 days’ notice to employees.

Challenges for Employers

The WFFA could allow employers an alternative measure to incentivize and manage their workforces. But employers who choose to offer a compensatory time program would face multiple challenges, including determining:

  • How much notice of the intent to take compensatory time is required.
  • Under what circumstances compensatory time will be permitted.
  • At what intervals the employer will pay out earned compensatory time.

Additionally, employers may find it difficult to forecast their labor needs due to the potential short notice required to utilize the earned compensatory time that was accrued on a rolling basis. Retaliation claims also could be raised based on the denial of requested compensatory time off or the assertion that the employer is coercing the employee to utilize compensatory time.

Next Steps

The WFFA will now be presented to the Senate. Whether the WFFA will become law remains unclear, as the bill’s previous versions have failed. However, the White House has already stated that President Trump would sign the WFFA if presented in its current form.

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