Overtime for PTO Bill Passes the House
Yesterday a bill that would possible amend the overtime provisions of the Fair Labor Standards Act passed the House. H.R. 1180, titled the Working Families Flexibility Act of 2017 was introduced by Alabama Representative Martha Roby this past February.
The proposed change would permit private employers who currently pay employees overtime for hours worked over 40 during a given week to substitute that overtime pay for compensatory paid time off in the amount of 1.5 hours for each hour of overtime worked. In order to do so, the employee would have to agree in writing with the substitution of PTO for overtime pay prior to working the overtime hours. The agreement must provide that the employee knowingly and voluntarily agrees to the substitution of PTO for overtime pay. In the case of unionized companies, the substitution can only be made if provided under the collective bargaining agreement.
To be eligible to substitute PTO for overtime pay, the employee must have worked for the employer for at least 1000 hours during the preceding uninterrupted 12 month period before the agreement is made or the receipt of the compensatory PTO. The Bill provides for limitations to the number of hours that can be accrued and the length of time it can be carried.
An employee may accrue not more than 160 hours of compensatory time. Any unused compensatory time accrued under this provision by the end of a calendar year would have to be paid to the employee no later than January 31st of the following year. An employer may designate and communicate to the employees a 12-month period other than the calendar year. However, any unused compensatory time must be paid not later than 31 days after the end of such 12-month period.
When employers are paying the unused compensatory PTO, the pay shall be paid at a rate of not less than the regular rate earned by such employee when the compensatory time was accrued or the regular rate earned by such employee at the time such employee received payment of such compensation, whichever is higher. This could mean that the employee is receiving pay at a rate higher than it would have been had the employer simply paid the overtime at the time it was incurred.
The Bill provides for some flexibility with when it pays the compensatory PTO. An employer may pay monetary compensation to the employee for accrued hours in excess of 80 hours provided it gives the employee 30 day notice. In this case, the wages would need to be paid consistent with the manner described above. However, if an employee voluntarily or involuntarily terminates employment, the employer must pay all accrued compensatory PTO to the employee.
Under the Bill, an employer who has adopted the policy of paying compensatory time instead of paying overtime wages may discontinue the practice upon 30 days written notice to the employees. Conversely, an employee may rescind their agreement to be paid compensatory PTO at any time. In such instances, the employer must pay all unused PTO accrued under the agreement within 30 days.
The Bill language contains significant provisions to protect the employee from employer threats or coercion to agree or not agree to the adoptions of compensatory PTO or to the use or failure to use such compensatory time. The Bill requires that the employee enter the agreement voluntarily and that they can essentially use the compensatory PTO or the corresponding pay in any manner that they choose. If passed, the Department of Labor will have to issue regulations that more specifically guide this practice.
While this Bill still may not get the votes it needs in the Senate (S. 801), employers should consider how adopting such a policy may impact their organizations. From a cash flow perspective, this could provide some flexibility during the year. However, the monies must be paid to the employee at the end of the 12 month period. Often employers who already have a practice of paying out unused PTO or vacation time at the end of a year struggle with the significant expense coming due. This is particularly difficult if it occurs at the end or beginning of the calendar year as there are usually additional expenses during the holidays and reductions in cash receipts during January and February for many ambulance providers.
For employees, this Bill could be a mechanism for accruing time in excess of any existing vacation, sick, or paid time of benefits that could be used for unexpected absences or for significant illnesses. Often, our employee are not financially prepared for the wages lost when they are sick or injured and do not have enough sick time to cover the absences. However, many have come to rely on the weekly payment of regularly worked overtime to cover their life expenses. Either way, it may give our employees something that they always love, the ability to choose.
We will continue to monitor the progress of this bill over the next few months and will keep members up to date. If our members have questions about this or any other Human Resource or Operational practices or issues, utilize the resources available to you as part of your AAA membership.