What Michigan Employers Should Know about the Federal “Comp Time” Bill

On May 2, the U.S. House of Representatives passed a Republican-sponsored bill known as the Working Families Flexibility Act. The legislation seeks to amend the Fair Labor Standards Act (FLSA) to permit employers to offer paid time off to workers instead of paying overtime.

Under the bill, qualifying employees could opt to receive 1.5 hours of paid time off for every hour of overtime they work, to a maximum of 160 hours. This would have to be approved by the employer and agreed to voluntarily by the employee.

Greater Flexibility for Employers, Possible Appeal for Employees

Though it has cleared the House, the so-called “Comp Time” bill will likely face strong opposition in the Senate, so uncertainty remains as to whether it will ever be presented to the President for his signature.

Should it pass, however, the new law could provide greater flexibility for employers when it comes to overtime. The ability to provide time off in lieu of overtime pay would likely have positive implications for a company’s cash flow. The bill also gives employers significant control, with exceptions, over scheduling that paid time off, allowing it to happen when it is convenient for the company.

Another possible benefit for employers is that employees may appreciate working for a company that offers comp time in lieu of paid overtime. While some may still opt to receive monetary compensation for working extra hours, others could value the ability to take additional time off for recreation, vacation, or to help with juggling busy family schedules.

The Fine Print

There are certain requirements both employers and employees would have to meet under the law in order to implement its comp time provisions:

  • An employee must have worked at least 1000 hours in the previous 12 months, which equals 25 consecutive weeks working 40 hours, before they can sign on.
  • The employee must agree, in writing, to the arrangement.
  • Employees may bank a maximum of 160 hours.
  • Workers can withdraw their participation at any time, return to being paid for overtime, and cash out any unused time off.
  • With 30 days’ notice, employers can stop offering comp time.
  • Employers have 30 days from the end of the year to reimburse employees for unused comp time.
  • The law will apply to nonunion employers. Companies with unionized workers that want to implement a comp time policy would have to negotiate it through collective bargaining.

As currently written, the Working Families Flexibility Act also has a sunset clause. If enacted, it would expire after five years if not reauthorized by Congress.

It should also be noted that state and local employment laws may prohibit employers from offering comp time arrangements, or place limits on doing so. We will have to wait until the final law is passed in order to assess how it will interact with these existing regulations.

May Increase Employment Litigation Liability for Employers

Though it has significant potential benefits for employers, one drawback of the Comp Time bill is that it could actually increase a company’s exposure to employment litigation if not carefully implemented.

Though the law includes language stipulating comp time arrangements must be voluntary, some employers might be tempted to push the envelope. This could get them into trouble. A company might, for example, direct overtime to employees who have comp time arrangements in favor of those who do not. This would apply indirect – though real – pressure on employees to opt in. Workers who do not may view this as a form of retaliation.

The law would also allow employers to deny an employee’s request for time off as “unduly burdensome.” If there are no clear policies around how the employer makes those determinations, it could also leave the company open to litigation from employees who feel they are not able to use their accrued time off they have accepted in lieu of overtime pay.

Careful Implementation Required

While we wait to see if the Comp Time bill will become law, employers may want to start thinking about the policies and procedures that will have to be in place if they want to offer comp time in lieu of overtime pay. These should stipulate that comp time will be a voluntary option that employees can withdraw from at any time.

Employers should also develop clear policies regarding the process for requesting time off and any restrictions they want to put in place. Though the law will give employers control over scheduling time off, it does not mean they will be able to give blanket denials to requests. Workers will have to be given the opportunity to use the leave they accrue.

Consulting with experienced employment counsel is also a good first step for any employers contemplating significant changes to compensation and other policies.

Posted in Employment Law.