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Mon May 13, 2013
Comp Time Or Cold Cash. Which Would You Pick?
Originally published on Mon May 13, 2013 1:19 pm
Overtime or comp time? Which one suits you best?
Both you and your boss may agree it would be best for you to work a sixth day when a big project is due in March, and then take off for a long weekend in June. No big deal.
But under the Fair Labor Standards Act of 1938, private employers must pay time and a half to workers who put in more than 40 hours on the job in any one week.
In most cases, workers are eager to get that overtime pay. But some might want more flexibility about how they get compensated for extra hours.
Republican lawmakers want to write compensatory time into law. Last week, the GOP-led House voted 223-204 along party lines to approve the Working Families Flexibility Act of 2013, which would allow workers to stockpile their comp time — up to 160 hours.
The idea of working longer hours in winter in exchange for an extended summer vacation might sound like a simple and popular change. But critics say the bill is fraught with risks for workers who would have no legal right to decide when to use their comp time, even if a family emergency occurs. They fear that employers would use the measure as a way to pressure employees into working erratic schedules for less cash pay.
Senate Democrats are likely to block the bill, but Republicans plan to keep pushing the idea, which they say is especially popular with many working mothers.
So what are the arguments — for and against — changing the law, and what do economists say? Here's an overview.
The Working Families Flexibility Act Of 2013
The GOP-backed bill would allow employees to choose between taking cash wages or getting comp time, accrued at the same time-and-a-half rate as overtime pay. The employer could not force a worker to take comp time but would permit stockpiling up to 160 hours. At the end of the year, the worker could convert any unused comp time for cash wages at that point.
At a House hearing last month, Karen DeLoach, a bookkeeper from Alabama, testified for the bill. "Certain times of the year, such as the quarterly payroll tax return months, are much busier than other times of the year," she said. "If I work overtime in April, for example, I would like to have the option of ... taking leave without pay in June or July."
The Democratic Pushback
Last week, the White House said President Obama would veto any legislation that "undermines the existing right to hard-earned overtime pay, on which many working families rely to make ends meet."
The administration says it objects to the Republican legislation because it lacks "protections for employees who may not want to receive compensatory time off in lieu of overtime pay," and fails to "guarantee that workers would be able to use the time they have earned when they choose."
The White House also points out that the bill would allow a worker to accrue as many as 160 hours of comp time — or 20 full days — but provides no protections if the employer were to shut down or declare bankruptcy before employees' free time could be used.
The Economist's View
Nariman Behravesh, chief economist for IHS Global Insight, a forecasting firm, said that in terms of the broad economy, the legislation would not have much of an impact because employers have figured out ways to cope with peak and slack periods without relying heavily on overtime. He noted that Labor Department statistics show no increase in overtime hours in the past year because companies routinely turn to temps and part-time workers to cover seasonal rushes of business.
While comp time and overtime pay might be issues that matter to individual workers, "this is definitely not something we hear about" when meeting with business owners, he said. "Not being able to hire skilled workers is a much bigger issue."