Commentary | Jobs and Unemployment

Another way for business to abuse workers

Opinion pieces and speeches by EPI staff and associates.


Another way for business to abuse workers

By Ross Eisenbrey

Of all the worker protections enacted over the years, the Fair Labor Standards Act remains the bedrock of family-friendly statutes. This law brought Americans the weekend, ending a period when six- or even seven-day work weeks were common.

The only enforcement mechanism for the 40-hour work week is the requirement that employers pay time-and-a-half for all hours over 40 in a week. In other words, the law creates a monetary disincentive for employers to work their employees more than 40 hours a week.

For two-thirds of a century, this system has struck a successful balance by giving employers a way to get work done at a fair price in times of overload, while protecting employees’ time with their families.

The compensatory, or “comp,” time bill pending in the House would upset that balance by creating a strong financial incentive for employers to lengthen the work week. A clear-headed look reveals that there is nothing in the proposed bill for workers but rhetoric and slick marketing.

Contrary to what the bill’s proponents say, it doesn’t create employee rights, it takes them away. It does, however, create a dangerous new employer right — the right to delay paying any wages for overtime work for as long as 13 months.

Under the current law, employees who work overtime must be paid time-and-a-half for those hours at the time they are worked.

Under the bill, however, an employee who works overtime hours in a given week might not receive any pay or time off for that work until more than a year later, at the employer’s discretion. Employees get no guarantee of time off when they want or need it. The employees, in essence, lend their overtime pay to the employer in hope of getting it back later as paid time off.

Overtime compensation is put at risk of fraud, bankruptcy and business closure; each year about half a million employers go out of business.

It seems strange that some employers are now asking for more flexibility in scheduling. The law permits them to grant unpaid time off, but few of them do it.

Numbers troubling
So why are employers interested in this bill? Here’s one good reason: A company with 200,000 employees, for instance, might get 160 free hours at $7 an hour from each of them (160 hours is the maximum allowed under the bill). That adds up to $224 million the company wouldn’t have to pay its workers for up to a year after the workers have earned it. Considering that the employer might have to pay 6 percent interest for a commercial loan of this magnitude, it could save $13 million by relying on comp time to “borrow” from its employees instead.

To improve living standards, working families really need three things: more income, fewer work hours and more regular schedules. This “Family Time Flexibility Act” fails on all three counts.

First, comp time will reduce worker income. By design, comp time is intended to reduce employee pay as a trade-off for shorter hours.

Not only will employees who substitute comp time earn less; so will the employees who refuse comp time and insist on being paid for overtime. Employers will assign overtime preferentially to those who accept comp time, thereby depriving the workers who need the extra cash of overtime work.

Second, comp time will mean longer work hours for many employees. Because it makes overtime work cheaper for the employer, they will be more likely to schedule it. This is fundamental economics. As overtime hours become less expensive, employers will purchase more of them. Comp time undermines the fundamental goal of the Fair Labor Standards Act’s overtime rules: to discourage overtime work by making it more expensive.

Many drawbacks
Workers who don’t manage to use at least two-thirds of their banked comp time will actually have worked more hours during the year, not less. Because the employer can veto the employee’s requests to use banked comp time, many employees will find their leave banks full at the end of the year. So, if they’ve worked overtime in the hope of converting those hours into family time, some workers will actually end the year with more time on the job and less time at home.

Comp time means unpredictable schedules and, therefore, less ability to balance work and life demands. The last thing a mother with kids to pick up from child care at 5 p.m. needs is to be told that she has to work two hours of overtime. Three hours off at some time in the future is of little benefit, particularly when it’s the employer — not the employee — who decides when that time can be taken. On its face, the notion that workers have to first work stressful, schedule-wrecking overtime to get time off is contradictory and counterproductive.

Child care is hard to find. Parents cannot afford to risk losing it when they are compelled to work overtime and fail to pick up their children at the appointed time. Good child care is also costly, so trading comp time for overtime pay is an especially bad deal for low-income parents.

Workers will pay
Comp time will leave workers more vulnerable. Nothing in the bill prohibits an employer from assigning overtime work exclusively to employees who have chosen comp time. Workers who depend on cash overtime to provide for their families would be hurt, with no remedy.

Needless to say, the average worker will not be able to afford an attorney to sue a bankrupt or liquidated employer for lost comp time credits. The bill does not even provide a priority in bankruptcy for employee claims.

If Congress really wants to shorten work hours and assure family-friendly schedules for America’s workers, there are many better options than this bill. One is prohibiting mandatory overtime, especially when scheduled on short notice. Or raising the overtime premium from time-and-a-half to double time. Or increasing the number of workers covered by the Fair Labor Standards Act by limiting exemptions.

Once we look past the false marketing, the naked truth about the comp time bill is revealed. It is nothing more than a scheme to allow employers to avoid paying overtime, a scheme that will result in longer hours, lower incomes and less predictable work weeks for American workers.

Ross Eisenbrey is vice president and policy director of the Economic Policy Institute


See related work on Jobs | Wages, Incomes, and Wealth

See more work by Ross Eisenbrey