U.S. House passes bill to substitute overtime pay with time off

On May 2, 2017, the Executive Office of the President issued a statement supporting a new House bill, H.R. 1180. H.R. 1180, the Working Families Flexibility Act of 2017, proposes to amend the Fair Labor Standards Act (“FLSA”) to allow private-sector employers to give employees the choice to receive paid time off instead of overtime compensation for hours worked over 40 per workweek. The Administration believes that H.R. 1180 would help American workers “balance the competing demands of family and work by giving them flexibility to earn paid time off—time they can later use for any reason, including family commitments like attending school appointments and caring for a sick child.” This bill passed the House with a vote of 229-197. The bill has not yet been voted on by the Senate, and similar bills have not passed the Senate in the past.

The Administration has advised that H.R. 1180 contains critical protections to ensure employees can continue to choose overtime pay and to prohibit employers from coercing their employees to accept compensatory time instead of overtime pay. Specifically, the bill states that an employer may provide compensatory time off to employees only if it is provided in accordance with a valid collective bargaining agreement or pursuant to an agreement arrived at between the employer and employee before the performance of the work and affirmed by a written or otherwise verifiable record. An employee may withdraw any such agreement at any time.

Only employees who have worked at least 1,000 hours for their employer during a period of continuous employment with the employer in the 12-month period before the date of the agreement or the receipt of compensatory time off are entitled to receive compensatory time off in lieu of overtime pay.

Moreover, the bill sets the maximum amount of compensatory time an employee may accrue to 160 hours. The employer would be required to provide monetary compensation for any unused compensatory time off accrued during the preceding calendar year no later than January 31st of each calendar year. However, the employer could choose a different 12-month period (other than the calendar year) to apply.

Any payment owed to an employee for unused compensatory time will be considered unpaid overtime compensation, according to the bill. It also states, that upon an employee’s termination from employment, whether voluntary or involuntary, an employee who has accrued compensatory time off shall be paid for the unused compensatory time in accordance with the provisions of the new law.

H.R. 1180 makes it unlawful for employers to interfere with an employee’s right to request or not request compensatory time off in lieu of overtime compensation or to require any employee to use such compensatory time. Employers who take such prohibited actions could be liable to the affected employee in the amount of the rate of compensation for each hour of unused compensatory time accrued and in an additional equal amount as liquidated damages.

It is important to note that H.R. 1180 does not require employers to offer compensatory time off in place of overtime compensation; the law provides employers the option to do so in accordance with its specific provisions. Moreover, except where a collective bargaining agreement provides otherwise, an employer that has adopted a policy offering compensatory time to employees may discontinue such policy upon giving its employees 30 days’ notice.

Further, if an employer has offered, and an employee has accepted, compensatory time off in lieu of overtime, the employee’s request to use compensatory time must not unduly disrupt the operations of the employer. Accordingly, employers may be able to deny certain requests to use compensatory time if the employee’s chosen period of time off would unduly disrupt operations.

Even though this bill is not yet law, McAfee & Taft will continue to track its progress and provide necessary updates because it could significantly alter the way employers may choose to handle overtime compensation for non-exempt employees.

The text of the bill can be found here: https://www.congress.gov/bill/115th-congress/house-bill/1180/text