From a human resources perspective, one of the most talked about issues in the past year has been overtime. As we wrote about previously, changes have already been introduced to the application of certain overtime exemptions, and, as businesses try to manage overtime, a question that can arise is whether overtime can be managed through the use of compensatory time programs. While the answer has generally been “no,” new legislation could change the rules.
On May 2, 2017, the House of Representatives passed the Working Families Flexibility Act (WFFA). The bill was subsequently received by the Senate, however, there is currently no timetable for a vote. The WFFA is the most recent attempt to amend the Fair Labor Standards Act of 1938 to allow compensatory time off for private sector employees. Under the provisions of the WFFA, non-union employees would enter into individual, voluntary agreements with their employers regarding compensatory time, while employees represented by a labor organization would need to have compensatory time provided for in their collective bargaining agreements. Employers that enter into these agreements would be required to compensate every hour of overtime worked with at least one and one-half hours of compensatory time off. After earning any compensatory time, employees would request future time off, and, provided that these requests give the employer reasonable notice and would not “unduly disrupt” the employer’s operations, the requests would be granted. Additionally, the WFFA would require employers to provide monetary compensation for any unused hours of compensatory time during the previous year. While the WFFA faces a fight in the Senate, and so its passage remains uncertain, the advancement of this legislation does again highlight an issue that private employers can find themselves facing – improper use of compensatory time.
Currently, the use of compensatory time instead of overtime pay is limited by the Fair Labor Standards Act to public employees (e.g., employees of governmental agencies). In lieu of paying nonexempt employees one-and-one-half their hourly wages for all overtime hours worked, private employers are essentially only allowed to provide compensatory time by modifying the employee’s weekly work schedule. For example, an employer could choose to compensate a 40-hour a week employee for two hours of overtime worked on Tuesday by allowing that employee to work only seven hours on Wednesday and seven hours on Thursday, thereby limiting the total hours worked in that week to 40. If the employer pays on a biweekly basis, the employer may be permitted to allow the carryover of compensatory time earned in one week to the subsequent week, provided that both weeks fall within the same pay period. However, in those instances, the employee must be granted one and one-half hours of compensatory time for each hour of overtime worked, and under no circumstances should an employee be allowed to carry any compensatory time over to a subsequent pay period. Because the future of the WFFA remains unclear, private employers should be sure to remember the current limitations on the use of compensatory time.
If you have any questions about how the information in this article may affect you or your business, please contact Peter Richter at firstname.lastname@example.org or (608) 257‑2281 or your Stroud attorney.
DISCLAIMER: The information in this article is provided for general informational purposes only, is not necessarily updated to account for changes in the law, and should not be considered tax or legal advice. This article is not intended to create, nor does the receipt of it constitute, an attorney-client relationship. You should consult with your own legal and/or financial advisors for legal and tax advice tailored to your specific circumstances.