Do you have employees who work overtime? Would they be interested in being given comp time instead? I recently read an article written by Isaac O’Bannon and Gail Perry on the CPA Practice Advisor website discussing the U.S. House of Representatives passing a bill that would allow employees to take comp time instead of being paid overtime.

The Working Families Flexibility Act would allow employers to offer paid time off instead of overtime if they work more than 40 hours in the workweek. If passed by the Senate and signed into law, it will be interesting to see how it affects overtime in states with more stringent laws (for instance, anything over 8 hours a day is subject to overtime pay in CA). I would assume that if this law goes into effect, that any overtime worked would be able to be converted to comp time, even if not over 40 hours has been worked.

Currently, if working overtime, the employee is paid 1.5 times their hourly wage. This law would allow the hours to be banked at 1.5 times the overtime hours worked to be used at a future date. When used, they would reduce their hours to work that week but be paid as if they worked their full schedule. For instance, if someone worked 4 hours of overtime, compensation is paid as if they worked 6. Instead of getting the extra money in their paycheck, they could bank those hours to use in the future. When they take the 6 hours off of their schedule (assuming they work 40 hours), they would actually only work 34 but be paid for 40.

The article stated Democratic leadership is opposed to the bill because, according to Elizabeth Warren (Dem.-Mass.), “House GOP are voting to make it legal for employers to cheat workers out of overtime. It’s a disgrace. With working families across the country scraping to make ends meet, Congress should strengthen protections for workers – not gut them.”

I have to disagree with Elizabeth Warren on this point. If employees are given the choice to take comp time instead of being paid overtime, they aren’t being cheated. They end up with the same amount of pay either way. They get to take time off to spend with their families and still be paid for the time they banked to use at a later date. And if the employee chooses the overtime pay instead of comp time, they’ll have the cash in their paycheck. If it’s up to the employees, they are getting what they want.

The part I do disagree with, however, is the statement that if the employee first chooses to bank the time and then requests the overtime pay that the employer can wait until year-end to pay it out. I feel that if the time is banked but they chose to be paid the amount of overtime instead, it should be added to the next paycheck.

It will be interesting to see if this bill becomes law, and if so, how long the hours can be banked until used, or if there will be a cap on the hours banked. Nothing is ever as simple as it could be, so the regulations surrounding the application of the rules will need to be understood by both employers and employees to guarantee compliance.

To read the full article on this topic, see http://www.cpapracticeadvisor.com/news/12331257/congress-votes-to-change-overtime-laws-allow-employers-to-offer-comp-time-instead