More flexibility might be coming to employers and employees in how and when overtime gets paid.
The U.S. House of Representatives passed a bill earlier this month permitting private employers to offer compensatory time off in lieu of overtime pay.
Some may think “comp” time, as it is often called, is already permitted by law.
The public sector can legally provide compensatory time off in lieu of overtime pay to its employees, but since 1938 when the Fair Labor Standards Act was passed, it has been illegal for private employers to offer compensatory time off in lieu of overtime pay.
While Democrats failed to support the bill, claiming that it would deny payment to workers, the bill, as written, puts the control of whether to accept compensatory time off in lieu of overtime pay into the hands of workers.
The bill, titled the Working Families Flexibility Act of 2017, states that only after an agreement is made between the employer and employee prior to working overtime “in which the employer has offered and the employee has chosen to receive compensatory time in lieu of monetary overtime compensation” and the agreement is “entered into knowingly and voluntarily by such employee and not as a condition of employment.”
This means that the employee has the choice to either accept overtime compensation or compensatory time off.
Of note, compensatory time off would be earned at time and a half.
For example, if a non-exempt employee works 50 hours in a workweek and chooses compensatory time off in lieu of overtime pay, the employee would have earned 15 hours of time off to be used at a later date.
Under the bill, employees must have worked for the employer at least 1,000 hours in the preceding 12 months to be eligible to enter into an agreement for compensatory time off. In addition, no employee can accumulate more than 160 hours of compensatory time off.
The law provides protections for workers to make sure they are compensated if they choose to take the overtime pay after already earning compensatory time off. The bill provides that if an employee earns time off, but then wants to be paid instead, the employee can make a request for payment and it must be paid within 30 days at the overtime rate of pay.
Further, on Jan. 31 of the following year, the employer must pay out all unused compensatory time off.
If an employee leaves the company, the compensatory time off must be paid at the overtime rate determined by the regular rate of pay the employee is currently being paid, or the earned rate, whichever is higher.
Under current law, if an employee works more 45 hours this week, she and her employer cannot enter into a mutual agreement to take time off in the future in lieu of overtime pay. Under the current law, that worker must be paid overtime pay and has no option under the law to take time off instead.
The new bill puts more flexibility and rights into the hands of employees. It must be passed by the Senate prior to becoming law.
This bill is a first step in modernizing the outdated 1938 Fair Labor Standards Act.