Comp Time in the Private Sector: Work-Life Enhancement Opportunity

On May 2, the U.S. House of Representatives passed the Working Families Flexibility Act, a bill that would allow employers to offer workers compensatory time off instead of time-and-a-half wages for overtime hours.

The legislation would amend Section 207 of the Fair Labor Standards Act, allowing private-sector employers and workers to voluntarily agree that workers would receive 1.5 hours of compensatory time for every hour of overtime worked.

How would private-sector comp time work?

If a worker and employer agree to comp time in lieu of overtime pay, here’s how it would work:

If the employee works, say, 50 hours in a single workweek, he or she could roll those 10 overtime hours into a comp time “bank” for use at a later time. Each hour is banked at an overtime (time-and-a-half) rate, so the 10 overtime hours are equivalent to 15 banked hours.

The worker’s request to use the 15 hours of comp time—that is, to take 15 paid hours off—must be approved by the employer. However, it can be rejected if the employer decides that taking that time off will "unduly disrupt” business operations, according to the language in the bill.

The bill imposes several limitations to banking overtime hours. Here are some of the most important:

• Workers who want to bank hours must have a written agreement to do so with their employer. The worker can revoke the agreement at any time. Employers can discontinue their comp time program with 30 days' notice.
• To be eligible for comp time, workers must have worked at least 1,000 hours for their employer during a continuous 12-month period.
• Comp time accrual is limited to 160 hours. Each year, employers must pay out any unused comp time from the previous year at the employee's regular rate of pay by Jan. 31st. The regular rate is either the worker's rate of pay at the time comp time was earned or the worker's regular rate of pay at the time it was earned, whichever is higher.
• Employers have the option to force payout of comp time that exceeds 80 hours at their discretion; however, they must provide workers with at least 30 days' notice before doing so.
• Workers also have the option to request a payout of their accrued but unused comp time. Employers have 30 days to fulfill the request.
• Upon termination, workers are entitled to a payout of their accrued, unused comp time.

It's also worth noting that, for states with daily or more stringent overtime requirements, the comp time legislation may not impact them. California employers are already required to pay overtime for all hours worked over eight in one workday, in addition to weekly overtime, so they could not implement a comp time schedule and still meet the state's overtime law requirements.

Fate of comp time legislation uncertain

Comp time legislation has been introduced several times since the 1990s, but it tends to stall in the Senate. The FLSA was amended in 1985 to provide comp time for overtime hours worked for public-sector workers, and lawmakers have been trying to extend that benefit to the private sector.

The bill is supported by the U.S. Chamber of Commerce and more than a dozen employer advocates. More than a dozen conservative groups released a written statement saying that the legislation makes “it easier for workers to achieve a better work-life balance.”

The Working Families Flexibility Act passed the House. The bill is now awaiting passage in the Senate Health, Education, Labor and Pensions Committee.

iSolved Time now has a Comp Time management feature built in, designed to help employers manage comp time for employees that agree to it.

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