"Comp Time" Proposal: Be Careful What You Wish For

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The U.S. House of Representatives will consider amending the federal Fair Labor Standards Act to permit private-sector employers to offer compensatory time off in lieu of monetary overtime compensation. The fast-tracked "Working Families Flexibility Act of 2013" (H.R. 1406) was approved by a House committee only eight days after its introduction.

Under the proposal, eligible non-union employees could agree to a comp-time arrangement "in writing or [in an] otherwise verifiable record." The policy could be implemented for eligible unionized employees via a collective bargaining agreement. Participating employees would then receive at least 1.5 hours of comp time for each overtime hour worked.

The Devil Is In The Details

Private-sector employers are understandably cheered by such news – comp time has been a long-sought goal.  But the bill contains a number of impact-diluting, unclear, or complicating provisions, including these examples:

?   No more than 160 hours of comp time could be accrued at any time (representing approximately 106 overtime hours worked). An employee who works 10 overtime hours each workweek would reach that cap in about 10 workweeks.

?   Employers would be required to cash-out unused comp time annually and when a worker's employment ends. The payment would be calculated at the higher of (i) the employee's regular rate at the time the comp time was earned, or (ii) the employee's final regular rate. But the "regular rate" is not necessarily just the employee's stated hourly rate. Typically, it also includes remuneration such as bonuses, commissions, incentive payments, and compensation of many other kinds. Figuring the "regular rate" for cashing-out purposes could therefore be a complex and daunting process as to employees who received such supplemental compensation over a period of time.

?   On 30 days' notice, an employer could cash-out a worker's accrued comp time exceeding 80 hours. But this too must be based upon the "regular rate" and entails the same potential complications. Maybe the payment would normally be based upon the regular rate when the comp time was earned, unless the alternative "final regular rate" is later read to have some broader-than-apparent meaning.

?   The employer would have to (i) determine and monitor each employee's eligibility to "agree to receive" or to "receive" comp time, which apparently could change over time; (ii) compute and record the hours accrued and keep up with when the balance must be (and perhaps may be) cashed-out; and (iii) administer both employees' cash-out requests and any notices that a non-union employee opts-out of the policy (including keeping up with who's "in" and who's "out").

?   The employee would be entitled to use comp time "within a reasonable period" after requesting it, unless this would "unduly disrupt" the employer's operations. By contrast, the employer could not so much as "attempt to" require employees to use comp time.

The proposal would neither instruct nor even authorize the U.S. Labor Department to issue any regulations.  Nevertheless, employers should also anticipate extensive, convoluted USDOL interpretative provisions.

Is It Better Than Nothing?

We are not convinced that it is. Many employers will see this as being more trouble than it is worth, especially if (as the bill currently provides) it would expire in five years anyway. Some who implement such a policy might later find themselves embroiled in litigation over its pitfalls and complexities.

Perhaps there is still time to simplify and refine the measure before it becomes the latest ineffectual minimum-wage tradeoff.