Talent Management Column

The End of Overtime?

The U.S. House of Representatives just passed a new bill that allows employers to give employees compensatory time off at some future point instead of overtime pay. If the bill becomes law, will it mark the end of overtime as we know it?

Tuesday, May 16, 2017
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A bill that recently passed the U.S. House of Representatives proposes an important change in how overtime work is handled. The Working Families Flexibility Act is based on a remarkably optimistic view as to how workplaces actually operate.

The Fair Labor Standards Act, which was passed in 1933, was based on the now-quaint idea that employers would look after their white-collar workers, who were essentially members of the "team" along with the owners and executives. Production -- or blue-collar -- workers, in contrast, needed minimum protections against the ability that employers have to abuse them. One of those protections was the idea that employers should have a disincentive to overwork employees beyond the standard eight-hour work day. (I told you this was quaint.) That disincentive would be extra pay -- time and a half or 150 percent of whatever the hourly rate is.

As it turns out, white-collar or "exempt" employees are not to be looked after in the way the 1930s Congress thought, but blue-collar workers still have those overtime protections, which is one of the reasons so many employers redesigned so many blue-collar jobs to make them exempt from those protections. In turn, that is why the Fair Labor Standards Act went from being the most boring topic in employment law to a battleground of litigation.

So what's the new bill about? In brief, it allows employers to give employees compensatory time off at some future point instead of overtime pay. Specifically, the employer would give them 1.5 times the amount of overtime hours worked as comp time later on. This will be great, the drafters of the bill say, because we all know that workers today really want control over their schedules and have more time off.

I suppose the first question is, "Did you ask the workers?" I'm sure there are some workers who would prefer fewer hours worked as opposed to more pay, but there is no doubt that most of them need the money.

The more important issue is whether this would even give employees more control over their schedules. The language of the bill is clear that employees do not get to choose when to take their time off.

There is language in the bill suggesting that employees and their managers will jointly work out when the time gets taken. But here's a reminder for legislators who missed the basics of how employment works. Employment law is very clear in giving the power to the employer to tell employee what to do, when to do it and how to do it. Typically, employees do not have the right to refuse overtime work, and the basic idea of at-will employment allows employers to fire employees for virtually any reason.   

So here's how that "joint working out" actually happens: The boss says, "Peter, we need you to work late Friday."  "Gee boss, that's when my kids play soccer, and I was planning to watch them." "Sorry Peter, but we really need you then, and besides, you'll get 1.5 times those hours off later on! And you're a team player, right?"

So the next week, I go to the boss and say, "Boss, I have a doctor's appointment next Wednesday afternoon, I'd like to use my comp time then."  The boss says, "Sorry Peter, Mary's going to be out then. Let's talk again next week."

Then the next week, the boss says to me, "Peter, looks like we'll be really slow tomorrow afternoon. Why don't you take that comp time from 1 p.m. to 4 p.m.? You're a team player, right?"

There is no concept of working out problems between individuals fairly when one has great power over the other. The reason overtime pay works for employees is precisely because it is a right that is not subject to negotiation. Once something moves from a right to a negotiation, the party with power wins, and that's the boss here. In this case, the language of the bill goes even further to imply that the employer gets the final say as to when comp time can be taken.

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The reason that employers like the bill, which is also the reason those who voted for it support it, is precisely because employers can save money by giving employees time off when there isn't much for them to do. But in well-run operations, employers have been squeezing that downtime harder and harder. They staff their operations with as few employees as possible and use temps when demand shoots up, dropping them when it drops down. So, in actuality, there is very little downtime for hourly employees. They may have to wait weeks for a time when business is slow enough to get comp time. When the costs of overtime go away, the incentive not to use it goes away as well.

So let's not kid ourselves, this bill has nothing to do with giving employees more control. It will lower wage costs and increase hours of work. These blue-collar workers are the ones getting some attention politically because their jobs have gotten so much worse over time. Gee, I wonder how that happens.

Peter Cappelli is the George W. Taylor Professor of Management and director of the Center for Human Resources at The Wharton School of the University of Pennsylvania in Philadelphia. His latest book is "Will College Pay Off? A Guide to the Most Important Financial Decision You'll Ever Make."



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