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An Alternative to Paying Overtime?

By Mark Addington

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Do you have an employee that has worked overtime hours and wants time off?  The Fair Labor Standards Act (FLSA) currently provides public sector employers with the ability to offer employees compensatory time off in lieu of paying monetary overtime compensation. Compensatory time is an arrangement where an employee would be eligible to receive at least one and a half hours of compensatory time for each overtime hour worked. There is now proposed legislation seeking to extend compensatory time benefits to employees in the private sector.

On April 11, 2013, the Working Families Flexibility Act of 2013 (H.R. 1406) was introduced in the U.S. House of Representatives. The act allows eligible unionized private sector employees to agree to a compensatory time arrangement via a collective bargaining agreement. Individual non-union employees would also be able to agree to a compensatory time arrangement “in writing or [in an] otherwise verifiable record.”  The Society for Human Resource Management (SHRM) has given its full support to the legislation. SHRM cites the employer’s option to offer compensatory time, as well as an employee having the choice to elect compensatory time if it is offered. However, just because the proposed legislation permits the employer and the employee to elect to engage in a compensatory time arrangement does not mean it should be passed.

Notwithstanding the general flexibility the proposed act might add to the private sector workplace, there are some significant issues employers should understand. For instance, employers would be required to cash-out unused compensatory time annually, and at the end of a worker’s employment, and computation can be complicated. The payment would be calculated at the higher of (i) the employee’s regular rate at the time the compensatory 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. Thus, calculating the “regular rate” for cashing-out purposes will likely be a daunting process with regard to employees who received such supplemental compensation over a period of time.

Significantly, employees would be able to opt out of the compensatory time arrangement at any time and receive cash payments for any banked hours. Additionally, under the proposed act, an employee would be entitled to use compensatory time “within a reasonable period” after requesting it, unless this would “unduly disrupt” the employer’s operations. By contrast, the employer must not ever “attempt to” require employees to use compensatory time. The proposed act makes clear that employers are prohibited from intimidating or coercing employees into a compensatory time arrangement.

Finally, the proposed act neither authorizes nor instructs the Department of Labor to issue any regulations regarding the enforcement of a compensatory time program. Regardless, employers will likely face voluminous convoluted regulatory interpretations should the act be passed. Based on a careful review of the act, it is clear that there are significant complexities and administrative issues for employers to sort through.

mark addingtonMark A. Addington is the employer’s advisor and advocate.  Mr. Addington is an attorney with the PCT Law Group, PLLC based in Jacksonville, Florida.  He can be reached at (904) 248-2429 and maddington@pctlg.com.


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