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Last week, the US House of Representatives passed the Working Families Flexibility Act, sending the new proposed law to the Senate. This new law could have a significant impact on private businesses, small and large, as it restructures labor standards to allow more flexible overtime agreements.
The proposed law would allow private employers to offer employees the opportunity to "bank" overtime hours for later use, rather than be paid for the overtime when it is earned. The banked overtime hours would accrue at a 1.5 X rate, and employees could use the hours as "comp time" (akin to vacation) or cash the hours out. The big catch is that if an employee receives a raise before cashing out, they will be entitled to receive their new rate of pay for their banked hours.
The law imposes requirements that an employee must meet to be eligible to bank comp time hours. The first requirement is that an employee cannot bank the comp time unless there is valid agreement in place, which can be part of a union's collective bargaining agreement. Additionally though, an individual employee must have worked 1,000 hours for the employer before being eligible (approximately 6 months of full time work).
Furthermore, employers are provided with many protections in this new legislation. For instance, an employer can force an employee to cash out any banked hours over 80 hours by providing a 30 day notice, and prohibits banking over 160 hours. But perhaps the most significant part for employers is the ability to control when an employee can use the comp time.
The program does not have to made available. However, it may be an attractive option to some employers. As with many forms of incentive based pay, allowing for the banking of comp time hours may be desirable by many employees who seek more flexibility in their daily life. Offering the program could help attract and retain top talent.
Hour banking can be most useful for businesses that have a busy and a slow season. Particularly because the bill allows employers final approval over the use of comp time, hour banking can be an efficient way to cut costs associated with overtime. Requiring all use of comp time to be done outside of the busy season could be a great way to cut overtime costs while addressing overstaffing issues that frequently arise in businesses with strong seasonal shifts.