We Should Probably Look at the Working Families Flexibility Act Too

On the subject of laws that might affect our earnings.

Photo credit: Alexander von Halem, CC BY 2.0.

Earlier today I wrote up a quick overview of the Financial Choice Act, which includes the admirable statement “Every American, regardless of their circumstances, must have the opportunity to achieve financial independence” before revealing itself to be a document describing how banks should be able to do whatever they want.

The House Financial Services panel passed the Financial Choice Act yesterday, but it still has to go through the full House and the full Senate, etc. etc., a lot of us remember our Schoolhouse Rock.

The Working Families Flexibility Act was passed by the full House earlier this week. (All Democrats and six Republicans voted no, and the rest of the Republicans voted yes.)

Here’s why this is a gamechanger, as quoted directly from the source:

An employee may receive, in accordance with this subsection and in lieu of monetary overtime compensation, compensatory time off at a rate not less than one and one-half hours for each hour of employment for which overtime compensation is required by this section.

In other words: if you work one hour of overtime, you can choose to receive time-and-a-half pay or 1.5 hours of paid time off. If you choose 1.5 hours of PTO, you do not get paid at all for that hour of overtime. This is extremely unclear in the Working Families Flexibility Act itself, but seems to be the case if you go read all the analysis about it.

So let’s do the math.

If an employee works a 50-hour week at the federal minimum wage of $7.25 an hour, and receives compensatory time off instead of overtime pay, that employee earns $290 for 40 hours of work and 15 hours of compensatory time off.

That employee might use the time off right away, and spend the following week working 25 hours while getting paid for the full 40, earning another $290. Total earnings over two weeks: $580 for 75 hours of work. (Wow, the minimum wage is too low.)

If the employee had received time-and-a-half overtime pay instead of compensatory time off, the 50-hour week’s earnings would have been $398.75 and the 40-hour week’s earnings would have remained at $290 but the employee would have worked the full 40 hours. Total earnings over two weeks: $688.75 for 90 hours of work.

In this situation, it’s fair to ask whether you’d prefer 15 hours of PTO or $108.75 before tax, and I suspect that different people would answer that question very differently.

The Working Families Flexibility Act is aware of this, and specifies that he employee is supposed to voluntarily agree to compensatory time off, and not be forced into it “as a condition of employment.”

But… we all know how that’s really going to go. We also know that sometimes employers say you’ll get comp time but then something happens and you don’t ever get it. (“We need you to stay a little longer—we’re really swamped here!”)

The Working Families Flexibility Act implies that employees will need to request their compensatory time off, as if it were any other type of PTO, which adds another complication to the mix. The document even specifies that if you can’t use your compensatory time off by the end of the year, your employer is required to pay out your hours—which means we could get situations in which you never get your PTO.

So let’s do the math again. If our sample employee above chooses compensatory time off but never receives it, those two-week wages become $580 for 90 hours of work and the employee receives an extra $108.75 on December 31 to pay out the 15 hours of unused comp time, or $688.75 total.

That’s exactly the same as they would have earned in an overtime situation, for the same amount of work—the difference is that they don’t earn it right away. (At least this incentivizes employers to give people compensatory time off instead of paying it out at the end of the year.)

[UPDATE: employees can also request to be paid out for their compensatory time off, and employers are supposed to fulfill that request within 30 days.]

The Working Families Flexibility Act also implies a level of flexibility that might not actually be good for working families; many workers are already in situations where they don’t know their work hours until the week before (or the day before, or the morning of), and giving employers more flexibility to schedule workers for overtime hours while reducing their hours at some point in the future presents a very obvious problem for anyone with a second job, childcare responsibilities (or daycare costs), and so on.

If you’ve been following The Billfold (or politics) for years, you might remember that this is not the first time Congress has tried to pass the Working Families Flexibility Act. Here’s a Billfold post from 2013:

I’ll end this post with the same question: would you rather have overtime pay or compensatory time off?