“COMP TIME”: FACT vs. FICTION Fiction: “H.R.1406 (The Working Families Flexibility Act) includes important new protections for workers not contained in previous comp time legislation.” Fact: H.R.1406 is the exact same legislation, except for the title, as H.R. 1982 from the 107th Congress. In fact, H.R.1406 is the exact same legislation as H.R. 1, as engrossed in 1997. Fiction: “H.R.1406 does not change the traditional 40-hour workweek in any way.” Fact: The Fair Labor Standards Act (FLSA) of 1938 established the traditional 40-hour workweek so workers could spend more time away from work with their families. But the FLSA’s only incentive for employers to adhere to the 40-hour workweek is the requirement that they pay time-and-a-half cash wages for overtime work. H.R.1406 would remove this fundamental requirement and allow employers to pay nothing for overtime work at the time the work is performed—in exchange for a promise of future paid leave. Fiction: “H.R. 1406 would not undermine overtime protections for workers.” Fact: The FLSA’s 40-hour workweek discourages employers from demanding excessive hours by making overtime more expensive. H.R.1406, by contrast, would encourage employers to demand excessive hours by making overtime less expensive, thus undermining the 40-hour workweek’s protections against excessive hours. Fiction: “H.R.1406 would not weaken overtime protections by reducing the cost of overtime to employers.” Fact: H.R.1406 would make overtime less expensive for employers in several ways. First, the banking of any comp time would be an interest-free loan from workers to employers, and over a period of 13 months the cost savings could be substantial, especially for larger businesses. Second, H.R.1406 would allow employers to pay less for overtime than for regular time. Under H.R.1406, employers would pay workers nothing at all at the time they work overtime. If employers eventually pay workers for comp leave, this would not be an additional expense for employers who would have been paying the workers anyway had they not taken the time off. Under H.R.1406 employers could avoid incurring any additional expense by scheduling comp leave at times when business is slow and they can require co-workers to assume job responsibilities of the absent worker without hiring additional staff or paying overtime to the coworkers. In this way, H.R.1406 would enable employers to get overtime work at no cost. If overtime is less expensive than regular time, employers have an economic incentive to demand as much mandatory overtime as they can accommodate. Third, employers who compensate their workers with time off rather than cash would generally lower their payroll costs and lower payroll taxes. Fourth, H.R.1406 would allow employers to reduce labor costs by substituting comp time for paid leave. All of these cost savings would constitute an economic incentive for employers to demand more mandatory overtime.

Fiction: “Job growth opportunities will not be lost as a result of H.R.1406.” Fact: One purpose of the 40-hour workweek is to discourage employers from avoiding new hiring and overworking a smaller number of workers. Because H.R.1406 makes overtime less expensive for employers, it would counteract the impact of the 40-hour workweek and encourage employers to demand more mandatory overtime from fewer workers at a time when the economy is already losing jobs. In many comp time programs for public sector employees, as the president of the Harris County (Texas) Deputies Association says, “You just end up working more overtime, which means that the county doesn’t have to hire as many employees.” Fiction: “H.R.1406 is designed to provide a new benefit for workers.” Fact: H.R.1406 is designed to reduce costs for employers, not provide a new benefit for workers. This explains why organizations representing employers support H.R.1406 and organizations representing working families, and working women in particular, oppose it (including the AFL-CIO, the National Organization for Women, 9 to 5—National Association of Working Women, the National Partnership for Women and Families, and the Ms. Foundation for Women). A National Federation of Independent Business (NFIB) representative testified before Congress in 1997 that many businesses need comp time because they “cannot afford to pay their employees overtime.” The overriding purpose of H.R.1406 is to lessen the expense of overtime to employers. If the employers promoting this legislation truly wanted to provide more time off to employees who work overtime, or wanted to arrange more flexible work schedules, they could do so under current law. Fiction: “H.R.1406 removes obstacles in the FLSA that prevent employers from providing increased work schedule flexibility to their employees.” Fact: H.R.1406 provides no additional work schedule flexibility not already allowed by the FLSA. Nothing in the FLSA limits in any way the amount of time off employers can give their employees. The FLSA already allows employers to give a working mother, for example, paid or unpaid leave to attend her child’s school play. If the leave is unpaid, the employer can also let the employee work extra hours to make up the lost earnings (in the same week or in a different week). Conversely, employers can allow extra unpaid leave to employees who work longer hours. Furthermore, the FLSA allows employers to arrange any kind of flexible work schedule they want. Without having to pay overtime, employers can arrange compressed work schedules, split shifts, and flexible starting and quitting times, for example. The vast majority of employers simply choose not to avail themselves of this flexibility. The only additional flexibility provided by H.R.1406 is the flexibility for employers not to pay time-and-a-half cash wages for overtime work. But the overtime pay requirement is the FLSA’s only incentive for employers to adhere to a 40-hour workweek. Fiction: “The FLSA makes it illegal for employers to provide time off in lieu of overtime pay.” Fact: The FLSA does not make it illegal for employers to provide any amount of time off, paid or unpaid. The FLSA does make it illegal for employers not to pay their employees time-and-a-half cash wages (or not to pay them anything at all) for overtime

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work—because this is the FLSA’s only incentive for employers to adhere to a 40-hour workweek. Fiction: “If a worker needs to take time off from work (for snow days, religious holidays, school emergencies, or time with family), but does not want to take unpaid leave because she cannot afford the loss of pay, H.R.1406 would allow the worker to take paid leave without loss of pay.” Fact: Compensatory time off is paid leave only in the sense that it is “paid for” by the worker’s own overtime earnings, minus interest. Under current law, a worker who keeps her overtime earnings (with interest) would be equally able to afford unpaid leave. The difference is that current law allows the worker—rather than the employer—to earn interest on her overtime earnings in the meantime, and protects her earnings against loss due to the bankruptcy of her employer. Fiction: “Under H.R.1406, the choice of comp time is truly voluntary.” Fact: H.R.1406 says that workers must agree to enter into comp time agreements voluntarily, but does not ensure that such agreements are voluntary, and in fact creates economic incentives making them less likely to be voluntary. Under H.R.1406, businesses compensating their employees with comp time would have lower costs than businesses compensating their employees with cash up front. H.R.1406 would thus create a cost advantage for businesses that directly or indirectly pressure their workers to accept comp time. For businesses that do not pressure their workers, H.R.1406 would make it harder to compete. Economic competition would force other workers to enter into comp time agreements simply to maintain their employer’s competitiveness (and their job), or to avoid other labor cost-saving measures. H.R.1406 says that employers cannot coerce their employees to enter into comp time agreements, but provides workers no meaningful remedy against coercion. Already millions of workers in numerous industries are made to “voluntarily” work off the clock or without overtime protection, as evidenced by recent cases involving Walmart, Taco Bell, and Iowa Beef Packers. Many more workers are likely to be coerced in the same way by employers seeking to reduce labor costs through comp time. Acceptance of comp time by any of these workers would increase the competitive pressure on other workers to do the same, and the result would be a downward spiral undermining wages and living standards. Opponents of the FLSA in 1938 similarly argued that workers should be given the “right to choose” overtime work without overtime pay. The premise of the 40-hour workweek is precisely the opposite: that minimum standards are necessary to resist the downward pressures in a competitive market that produce coercive choices. Fiction: “Under H.R.1406, acceptance of comp time cannot be a condition of employment.” Fact: H.R.1406 says that employers can offer comp time only if workers agree voluntarily and not as a condition of employment. But H.R.1406 provides no remedy to workers who are fired, or never hired, because they refuse to enter into a comp time agreement. The remedy for employer coercion is damages at twice the value of the worker’s comp time bank, but workers fired or never hired do not even have a comp time

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bank. Neither H.R.1406 nor the FLSA provides for reinstatement or damages to a worker fired or never hired under these circumstances. Fiction: “H.R.1406 includes numerous protections for employees to ensure that employees are not coerced into choosing comp time in lieu of wages.” Fact: H.R.1406 does not provide any meaningful remedy to workers who accept comp time as a result of employer coercion. H.R.1406 provides that such workers can sue for damages at twice the value of their comp time banks, but this is an ineffectual and poorly targeted remedy. Workers who fear their employer enough that they accede to coercion in the first place are the least likely to initiate litigation afterwards. And the notion that such an unlikely lawsuit for such a paltry amount of money would ever deter employer coercion is fanciful, especially since H.R.1406 creates a much stronger economic incentive to encourage employer coercion. Fiction: “Under H.R.1406, an employee who has accrued compensatory time may generally use the time whenever he or she so desires.” Fact: Under H.R.1406, employees cannot use comp time whenever they so desire. H.R.1406 gives employers carte blanche to deny any comp time request that “unduly disrupts the employer’s operations.” Even if the requested leave would not cause undue disruption, employers would not have to allow time off on the exact days requested by the worker, according to the Fifth Circuit’s recent interpretation of identical language applicable to the public sector. See Houston Police Officers Union v. Houston, No. 0121117 (April 29, 2003). And even if an employer denies comp leave in violation of this employer-friendly standard, the worker’s only recourse is to put her job on the line by suing her employer—most likely an exercise in futility given the amount of money involved and the fact that her comp time request would surely be moot long before litigation is concluded. Knowing this, employers under H.R.1406 would be free by and large to grant comp time requests only when business is slow and they incur no additional cost from allowing the time off. In many comp time programs for public sector workers, “staffing levels are such that it is difficult to gain access to time off,” as a public sector union recently testified before Congress. The president of the Harris County (Texas) Deputies Association says, “It’s not flexible at all. It’s a damn joke.” Fiction: “H.R.1406 would give working parents the option to choose when and how to spend more time with their families.” Fact: H.R.1406 would not give working parents the right to spend any more time with their families, let alone the right to decide when and how. H.R.1406 would put more control over workers’ schedule in the hands of employers, not workers. Employers would have a new economic incentive to require more mandatory overtime, and in most cases could fire workers who refuse to work longer hours. Employers would decide whether to offer comp time in the first place. Employers could decide to offer comp time to some employees and not others, or on some occasions and not others. Employers would decide how much, if any, overtime work to assign employees who insist on being paid in cash. Employers could decide to cash out workers’ comp time banks any time they wish. Employers would decide whether employees who bank comp time could ever take any time off. If employers did allow time off, they would still decide when workers

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could take it. And if workers were allowed to take comp time leave, employers could still require an additional 40 hours of work during the same week without paying overtime. Fiction: “Under H.R.1406, employees always have the right to receive cash wages for overtime worked.” Fact: H.R.1406 would not give working parents the right to spend any more time with their families, let alone the right to decide when and how. H.R.1406 would put more control over workers’ schedule in the hands of employers, not workers. Employers would have a new economic incentive to require more mandatory overtime, and in most cases could fire workers who refuse to work longer hours. Employers would decide whether to offer comp time in the first place. Employers could decide to offer comp time to some employees and not others, or on some occasions and not others. Employers would decide how much, if any, overtime work to assign employees who insist on being paid in cash. Employers could decide to cash out workers’ comp time banks any time they wish. Employers would decide whether employees who bank comp time could ever take any time off. If employers did allow time off, they would still decide when workers could take it. And if workers were allowed to take comp time leave, employers could still require an additional 40 hours of work during the same week without paying overtime. Fiction: “H.R.1406 would not reduce worker income because comp time is paid leave.” Fact: H.R.1406 would reduce worker income, regardless of the fact that comp time is paid leave. Under H.R.1406, a regularly scheduled full-time employee who works overtime and takes compensatory time off would have the same income as if she had never worked overtime in the first place. She would be paid for the comp time when she takes it, just as she would have been paid for working had she not taken the time off, but she would not be paid anything at all for overtime work during the week she worked overtime. She would never receive the supplemental income that overtime once provided. And, again, workers denied overtime assignments because they insist on cash overtime would also see their income reduced. Fiction: “H.R.1406 would not reduce worker income because of a provision in the bill that allows workers to cash out accrued comp time at the higher of either their final regular rate or their regular rate when they worked the overtime.” Fact: To begin with, this provision is simply an invitation for employers to delay raises until the beginning of the comp time year, or to cash out employees before giving raises. More importantly, this provision has nothing to do with the reason why comp time reduces worker income (see previous paragraph). Fiction: “H.R.1406 would protect workers’ overtime earnings against loss due to the bankruptcy of their employer.” Fact: Under H.R.1406, firms in some industries, notably those characterized by thin capitalization, could simply close up shop when their comp banks get too big and leave workers uncompensated for the overtime hours they have worked. Proponents of H.R.1406 claim that accrued comp time would have the same legal status as other employee wages in bankruptcy proceedings, but H.R.1406 does not even amend the

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Bankruptcy Code. In the boom year of 2000, the SBA reports that 550,000 businesses folded, and 200,000 of them failed. In the case of most of these failures, workers would be lucky to recover any of their banked overtime earnings, regardless of whether the bankruptcy court considered comp time to be unpaid wages. Fiction: “Sometimes time off is more valuable than being able to buy that perfect sofa from Pottery Barn.” Fact: Perhaps some overtime workers may use their overtime earnings to buy “that perfect sofa from Pottery Barn,” but it is misleading to suggest that this is the norm. Millions more workers depend on overtime pay to make ends meet and pay their housing, medical, and food bills. Fiction: “The provisions applying the FLSA to the public sector were added in 1985 and therefore included a recognition that the workplace and the workforce had changed greatly since the 1930s when the FLSA was written.” Fact: H.R.1406 would reduce worker income, regardless of the fact that comp time is paid leave. Under H.R.1406, a regularly scheduled full-time employee who works overtime and takes compensatory time off would have the same income as if she had never worked overtime in the first place. She would be paid for the comp time when she takes it, just as she would have been paid for working had she not taken the time off, but she would not be paid anything at all for overtime work during the week she worked overtime. She would never receive the supplemental income that overtime once provided. And, again, workers denied overtime assignments because they insist on cash overtime would also see their income reduced

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