by Celeste Blackburn, SPHR, Managing Editor

In May 2013, the U.S. House of Representatives passed HR 1406, the Working Families Flexibility Act, which would allow employers to offer compensatory time off in lieu of time-and-a-half cash wages for overtime. Employees would be allowed to “cash out” unused comp time within specified periods of time. While the Society for Human Resource Management (SHRM) supports the bill, it is currently opposed by both unions and the majority of congressional Democrats, which means it will face a much tougher audience in the Democrat-controlled Senate.

Comp time under the Act

The bill would amend the Fair Labor Standards Act (FLSA) to let private sector employers offer compensatory paid time off to hourly employees who work more than 40 hours per week in lieu of cash wages at 1½ times their regular rate of pay. The comp time would be offered at a rate of 1½ hours per hour of overtime worked, and both the worker and the employer would need to agree in writing to the comp time arrangement. To be eligible for the comp time, an employee would have to have worked a minimum of 1,000 hours within the past 12 months. Employees could accrue up to 160 hours of comp time a year.

Employees would be permitted to use their accrued comp time on request within a reasonable time, provided their use of comp time would not unduly disrupt the employer’s operations. Any unused comp time would be paid out in cash at the end of each year, and workers would be free to cash out their accrued comp time on request.

Arguments for the bill

Supporters of the bill argue that employers in the public sector are free to offer comp time instead of cash payment for overtime, and the rules in the private sector should not be different. One of the bill’s sponsors, Rep. Martha Roby (R-Alabama), has said it “is about helping working moms and dads, providing the ability to commit time at home.”In a press release, SHRM praised the passage of the bill, calling it “an important step toward offering the flexibility” that employees need because they must “juggle many work-life responsibilities.” SHRM notes that comp time would also offer flexibility benefits for employers.

Concerns about the bill

Democrats have raised concerns that while the bill prohibits employers from coercing workers into taking comp time instead of overtime, it lacks a specific definition of coercion. Several amendments offered to protect employees from being coerced into taking comp time in lieu of overtime pay were defeated.

Labor unions have also voiced concern about the bill. In a press release, the AFL-CIO predicts that the law could be used to deny employees overtime, and therefore overtime pay, allowing them to earn only comp time. The union also claims the bill could encourage employers to demand longer hours because overtime is made less expensive, explaining “employers would be able to pay workers nothing at all for overtime work at the time the work is performed and could schedule comp time off at no extra cost to them (for example, during less busy periods when co-workers can pick up the slack).”

In addition, the AFL-CIO argues that even if an employee were to choose to cash out comp time at the end of the year that money has essentially been an interest-free loan to the employer since the time it was earned. Having that extra money on the books could provide an incentive for employers to push comp time on employees. Another concern is that employees could be forced to earn any paid time off instead of having employer-provided vacation or sick days.

Bottom line

It is unlikely that private sector employers and employees will have the option of comp time anytime soon. Even if the bill were to make it through the Senate, the White House has threatened to veto it on the grounds that it would weaken FLSA protections for employees.