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North Shore Law Employment Lawyer Marcia Cotler on Congressional Initiative on Overtime

May 22, 2017 | News

Overview of the Federal Working Families Flexibility Act of 2017

The Working Families Flexibility Act of 2017 (H.R. 1180) was passed by the House of Representatives on May 2, 2017 and will now make its way over to the Senate for further consideration. The vote in the House fell generally along party lines, with Republicans supporting the bill and Democrats opposing it.  The purpose of the act is to amend the Fair Labor Standards Act to allow private sector employees to choose how they are compensated for overtime. Employees would have the choice between either getting paid time and a half their hourly wage for all hours worked in excess of 40 hours in a given workweek, or alternatively, to bank paid time off to be taken at a later time at a rate of one and a half hours per hour of overtime worked.  Employees in the public sector already have the option to choose between overtime pay of paid time off so this Act looks to offer private sector employers the same options as public sector employees.

The Act has several safeguards to prevent employers from taking advantage of employees.  First, the employee has the choice prior to performing the overtime work whether to bank paid time off in lieu of overtime pay. However, employees who are party to a collective bargaining agreement may have the decision as to how they will be compensated made on their behalf.  Further, unlike unearned paid time off which is often use it or lose it in any given calendar year, banked paid time off earned from working overtime is not forfeited but rather must be paid out by the employer at the end of the year if not used. There is also a cap of 160 paid time off hours that can be accrued and any hours in excess of that threshold must be paid out by the employer.  In addition, the employer may at its option choose to pay an employee overtime compensation instead of paid time off after the employee has accrued 80 hours of paid time off.  In general, Republicans who support the Act say that it gives employees more flexibility to save up needed paid time off to attend to family obligations.

Conversely, Democrats who criticize the Act express concern that employees who choose to bank hours for future paid time off may not get to actually use the paid time off when they need it because the employer retains the right to authorize when time off can be taken.  They also argue that forgoing immediate overtime pay in lieu of future time off amounts to giving the employer an interest free loan. Critics of the Act also point out that if an employer goes out of business or declares bankruptcy, the paid time off would disappear altogether. While the Democrats are in favor of giving employees more paid time off, they do not think that earning paid time off should be at the expense of forgoing overtime compensation.  Rather Democrats would like to see the labor laws amended to give employees more paid leave as a matter of right. They feel that this Act does not actually improve working conditions, but rather encourages already cash strapped hourly workers to forgo much needed overtime pay for the promise of future paid time off.