Employers Faced with Potential Overtime Dilemma

The Fair Labor Standards Act is the federal law which requires private-sector employers to pay time-and-a-half to hourly employees who work overtime.

On Tuesday, May 2, 2017, the United States House of Representatives passed a bill that would give employees who work long hours more time off, but at the expense of their present unwaivable right to time and a half for hours worked in excess of forty in a given work week. Under the new legislation, if it becomes law, employers would have the option of offering non-exempt hourly employees who work overtime hours earned time off (“comp time”) in lieu of overtime pay.

The proposed law is known as the Working Families Flexibility Act, and the bill passed the House by a vote of 229-197. The proposed law is not a new idea. It seeks to extend a similar provision available to government workers since 1985 to private-sector employees, making it legal for them to choose between an hour and a half of paid comp time and time-and-a-half pay when they work more than 40 hours in a workweek.

Under the proposed changes, if his or her employer elects to offer comp time in lieu of overtime, the employee would be able to voluntarily choose to receive comp time which he or she could then bank and use at a future date in lieu of immediate overtime pay in his or her paycheck. If the employees change their minds and decide they want the pay after all, they would have the option of “cashing out,” with the employer then being required to pay the employee the overtime within 30 days.

The bill now faces the Senate. Under the proposed law, the decision whether or not to offer comp time in lieu of overtime pay would be discretionary, not mandatory, for employers. Though costs savings may provide an incentive to many employers to offer comp time to hourly employees in lieu of overtime pay, it is anticipated that even if the bill becomes law, many employers will simply elect to continue paying employees overtime to avoid potential FLSA compliance issues associated with the potential change in the law.

Here’s what employers need to know about the Working Families Flexibility Act if it becomes law. Employers will, first and foremost need to decide whether they are going to pay time and a half to non-exempt hourly employees who work overtime hours, or offer them comp time under the proposed new FLSA rules. If they decide to offer comp time, employers will need to develop internal compliance and tracking systems, to make sure that they are properly recording the number of overtime hours the employee has worked and converting that amount of time to the proper amount of comp time hours to which the employee is entitled. The employer will likewise need to develop a fair and equitable system for scheduling overtime by and among hourly employees that does not discriminate between employees or coerce employees into accepting comp time in lieu of overtime pay. The employer will need to develop a fair, equitable and reasonable system for approving requests by employees to use accumulated comp time. The employer will need to keep accurate time records of hours worked by employees to comply with FLSA timekeeping requirements.

For more information about the Working Families Flexibility Act or your obligations as an employer under the Fair Labor Standards Act, please contact Widerman Malek, PL.