H.R. 1406: Time Off Instead of Overtime Pay

H.R. 1406: Time Off Instead of Overtime Pay

May 9, 2013

H.R. 1406 the “Working Families Flexibility Act of 2013” allows employers to offer their employees paid time off instead of overtime pay, if the employee agrees to it.

*Get all the details on this bill in podcast episode CD028: Overtime


The Fair Labor Standards Act of 1938 established rules for company owners to prevent mistreatment and general screwing over of their workers. This law was responsible for, among other things, prohibiting child labor, the minimum wage, and guaranteed time-and-a-half overtime payments.

The Working Families Flexibility Act changes the rules regarding guaranteed overtime payments.

Bill Highlights

Section 2: Adds a new section to the Fair Labor Standards Act of 1938. The new section says:

(s) Compensatory Time Off for Private Employees

(1) Instead of direct time-and-a-half payment of overtime pay, an employee will be allowed to be given time-and-a-half in paid time-off.

(2) Conditions

  • This is only allowed if allowed by applicable collective bargaining agreements.
  • The boss and employee agree to this arrangement in writing before the overtime work is performed.
  • The employee must accept this arrangement voluntarily and must not be forced into it by the terms of their employment.
  • To receive time-off instead of overtime pay, the employee must have worked at least 1,000 hours for the boss in the year before agreeing to the time off arrangement or taking the time-off (that’s about 20 hours per week).

(2) Hour Limit

  • The employee cannot accrue more than 160 hours (four weeks) of overtime time-off.
  • By January 31st of each year, the boss must pay the employee for any overtime time-off that they didn’t take in the previous year.
  • The boss is allowed to choose to pay the employee for overtime over 80 hours after giving the employee 30 days notice, which is not required to be in writing.
  • The boss will be allowed to cancel the time-off arrangement by giving employees 30 days notice, which is not required to be in writing.
  • The employee will be allowed to cancel the time-off arrangement at any time. They can request payment for their accrued time-off in writing and the boss must give it to them within 30 days.

(4) Rules for the Boss

  • The boss is not allowed to “intimidate, threaten, or coerce” an employee in order to get them accept a time-off instead of payment arrangement.
  • The boss is not allowed to require an employee to use their time-off.
  • Breaking this rule will result in the boss having to pay the employee their overtime pay plus damages. (Section 3)

(5) End of Employment

  • The employee must be paid for their unused accrued overtime time-off when they leave the company, regardless of whether they quit or were fired.

(6) Pay Rate

  • The employee must be paid at least the rate they were making at the time they accrued the overtime time-off or their final pay rate, whichever is higher.

(7) Use of Time-Off

  • An employee who wants to use their accrued overtime time-off “shall be permitted by the employee’s employer to use such time within a reasonable period after making the request if the use of the compensatory time does not unduly disrupt the operations of the employer.”

Section 5: The bill expires five years after it’s signed into law.

Support and Opposition

In general, organizations of owners are supporting this bill while organizations of workers and unions are opposing the bill.

H.R. 1406 passed the House of Representatives on Wednesday, May 8th. It now moves into the Senate where it will die.

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