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Heads-Up Employers: Is comp time the wave of the future?

The answer is yes, if House Majority Leader Eric Cantor has anything to say about it.

On February 5, 2013, Cantor delivered a speech at the American Enterprise Institute (AEI) entitled “Making Life Work” that set forth the agenda the House majority is expected to pursue over the next two years. One of the proposals outlined in Cantor’s plan to “make life work” was that private employers should be afforded the flexibility to allow employees to convert overtime to comp time.

In 1938, Congress enacted the Fair Labor Standards Act (FLSA), which requires that most non-exempt workers receive not less than a minimum wage and establishes a standard 40-hour work week for most workers. The law provides that covered employees must receive overtime pay for each hour they work in excess of 40 hours in a single work week. Overtime pay is paid at the rate of 1½ times the employee’s regular rate of pay.  In 1985, Congress permitted state and local governments to compensate their employees’ overtime hours with paid time away from work (compensatory time or “comp time”) in lieu of overtime pay.  Here’s how comp time generally works in the public sector: Instead of being paid in cash for the overtime hours, the employee is allowed to accumulate and take time off in the future with pay on the basis of 1½ hours of paid time off for each actual hour of overtime worked.  To date, this type of comp time option has not been extended to private sector employers.  Indeed, private sector comp time is unlawful except in certain limited situations.

According to Cantor, “Federal laws dating back to the 1930s make it harder for parents who hold hourly jobs to balance the demands of work and home. An hourly employee cannot convert previous overtime into future comp time or flextime.  In 1985, Congress passed a law that gave state and municipal employees this flexibility, but today still denies that same privilege to the entire private sector.  That’s not right.”

“Imagine if we simply chose to give all employees and employers this option,” Cantor said. “This is the kind of common sense legislation that should be non-controversial and moves us in the right direction to help make life work for families.”

Cantor’s plan seemingly calls for amendment of the FLSA to permit a private sector employer to offer, and an employee to receive if they so choose, comp time in lieu of overtime pay.  Such a proposal would not be unprecedented, as bills on this topic have been repeatedly introduced in Congress; most recently in 2009 under the title the “Family-Friendly Workplace Act.” So why is private sector comp time of interest now?  In the midst of general Congressional gridlock, both political parties seemingly have something to gain by passing a comp time amendment: Republicans can tout the amendment as a cost-saving advantage for employers and Democrats, as a way to provide employees with additional paid time-off (anyone remember the Ohio Healthy Families Act: A Bad Diagnosis and a Worse Prescription.  ); see Bill Clinton Pushes for Paid Sick Leave Alongside House Democrats.

Obviously, there are pros and cons to any piece of legislation, including private sector comp time.  It is, however, ironic that compensatory time in the public sector was devised as a means of dealing with public employer financial concerns. Yet in the private sector, comp time legislation has been branded as a way to provide workplace “flexibility.”  Certainly allowing comp time in the private sector has the potential to affect both employers and employees.  We will keep you posted as to any developments on the comp time front.