On May 2, 2017, the House of Representatives passed H.R. 1180, better known as The Working Families Flexibility Act. The bill proposes to amend the Fair Labor Standards Act (“FLSA”) to permit private sector employees to “bank” overtime hours for later comp time use. For example, an employee working 50 hours in a workweek could, instead of receiving overtime pay for those 10 overtime hours, roll those hours into his or her comp time bank for later use. Each hour banked would be banked at an overtime rate, meaning that in this example, those 10 overtime hours would be equivalent to 15 banked hours.
This banking of time would be subject to the following limitations:
- Employees wishing to bank hours may only do so subject to a written agreement with their employer (a valid collective bargaining agreement would serve the same purpose for a unionized workforce). This agreement must be revocable by the employee at any time (although the employer always has the option to discontinue its comp time program with 30 days’ notice).
- To be eligible, employees must have worked for at least 1,000 hours for their employer during a continuous 12-month period.
- Employees may use any available comp time within a reasonable period after making a request to the employer so long as the use of available comp time does not unduly disrupt the employer’s operations.
- Employees may not accrue more than 160 hours in their comp time banks. No later than January 31st of each year (or 31 days after any other chosen twelve-month period), employers must pay out any unused comp time from the previous year at the employee’s regular rate of pay (either at the time the comp time was earned, or at the employee’s then regular rate, whichever is higher).
- Employers also have the option, at any time, to force payout of any accrued comp time that exceeds 80 hours, so long as they give the affected employee at least 30 days’ notice.
- Similarly, employees may, at any time, request a payout of their accrued but unused comp time. Employers have 30 days in which to make these requested payments.
- Employees must receive pay for any accrued but unused comp time upon termination.
The law also carries with it penalties in the form of liquidated damages for any violations. Employees are also granted a private right of action to directly sue under the new law.
The bill passed the House along party lines with a vote of 229 to 197, and has drawn criticism from Democrats as “an empty promise.” Critics of the bill complain that there is no guaranteed right to use available comp time, that employers may unilaterally cash out 80 hours of banked comp time which could disrupt the employees’ plans for that bank, that employers have up to 30 days to provide payment when employees request it, and that there is no remedy available if an employer were to go bankrupt or shut down. The bill is now headed to the Senate for further consideration. President Trump’s advisors have indicated that he will sign the bill if presented. Should the bill become law, it will have broad-reaching impacts on nearly all employers in the private sector. However, employers in states with daily or other more stringent overtime requirements may not see much change at all, depending on their states’ interplay with the FLSA. For example, California employers who are required to pay overtime for all hours over eight in one workday (in addition to weekly overtime) may not be able to implement such a comp time schedule and still meet their obligations under state law. Further analysis of the language of any final federal law, as well as California law restrictions, will be necessary to determine the potential impact on California employers. Sheppard Mullin will continue to watch this bill and provide updates as they arise.