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105th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES

 1st Session                                                     105-21
_______________________________________________________________________


 
                WORKING FAMILIES FLEXIBILITY ACT OF 1997
                                _______
                                

 March 12, 1997.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

   Mr. Goodling, from the Committee on Education and the Workforce, 
                        submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                         [To accompany H.R. 1]

      [Including cost estimate of the Congressional Budget Office]

      The Committee on Education and the Workforce, to whom was 
referred the bill (H.R. 1) to amend the Fair Labor Standards 
Act of 1938 to provide compensatory time for employees in the 
private sector, having considered the same, report favorably 
thereon with an amendment and recommend that the bill as 
amended do pass.
  The amendment is as follows:
  Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Working Families Flexibility Act of 
1997''.

SEC. 2. COMPENSATORY TIME.

  Section 7 of the Fair Labor Standards Act of 1938 (29 U.S.C. 207) is 
amended by adding at the end the following:
  ``(r) Compensatory Time Off for Private Employees.--
          ``(1) General rule.--
                  ``(A) Compensatory time off.--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.
                  ``(B) Definition.--For purposes of this subsection, 
                the term `employee' does not include an employee of a 
                public agency.
          ``(2) Conditions.--An employer may provide compensatory time 
        to employees under paragraph (1)(A) only if such time is 
        provided in accordance with--
                  ``(A) applicable provisions of a collective 
                bargaining agreement between the employer and the labor 
                organization which has been certified or recognized as 
                the representative of the employees under applicable 
                law, or
                  ``(B) in the case of employees who are not 
                represented by a labor organization which has been 
                certified or recognized as the representative of such 
                employees under applicable law, an agreement arrived at 
                between the employer and employee before the 
                performance of the work and affirmed by a written or 
                otherwise verifiable record maintained in accordance 
                with section 11(c)--
                          ``(i) in which the employer has offered and 
                        the employee has chosen to receive compensatory 
                        time in lieu of monetary overtime compensation; 
                        and
                          ``(ii) entered into knowingly and voluntarily 
                        by such employees and not as a condition of 
                        employment.
          ``(3) Hour limit.--
                  ``(A) Maximum hours.--An employee may accrue not more 
                than 240 hours of compensatory time.
                  ``(B) Compensation date.--Not later than January 31 
                of each calendar year, the employee's employer shall 
                provide monetary compensation for any unused 
                compensatory time off accrued during the preceding 
                calendar year which was not used prior to December 31 
                of the preceding year at the rate prescribed by 
                paragraph (6). An employer may designate and 
                communicate to the employer's employees a 12-month 
                period other than the calendar year, in which case such 
                compensation shall be provided not later than 31 days 
                after the end of such 12-month period.
                  ``(C) Excess of 80 hours.--The employer may provide 
                monetary compensation for an employee's unused 
                compensatory time in excess of 80 hours at any time 
                after giving the employee at least 30 days notice. Such 
                compensation shall be provided at the rate prescribed 
                by paragraph (6).
                  ``(D) Policy.--Except where a collective bargaining 
                agreement provides otherwise, an employer which has 
                adopted a policy offering compensatory time to 
                employees may discontinue such policy upon giving 
                employees 30 days notice.
                  ``(E) Written request.--An employee may withdraw an 
                agreement described in paragraph (2)(B) at any time. An 
                employee may also request in writing that monetary 
                compensation be provided, at any time, for all 
                compensatory time accrued which has not yet been used. 
                Within 30 days of receiving the written request, the 
                employer shall provide the employee the monetary 
                compensation due in accordance with paragraph (6).
          ``(4) Private employer actions.--An employer which provides 
        compensatory time under paragraph (1) to employees shall not 
        directly or indirectly intimidate, threaten, or coerce or 
        attempt to intimidate, threaten, or coerce any employee for the 
        purpose of--
                  ``(A) interfering with such employee's rights under 
                this subsection to request or not request compensatory 
                time off in lieu of payment of monetary overtime 
                compensation for overtime hours; or
                  ``(B) requiring any employee to use such compensatory 
                time.
          ``(5) Termination of employment.--An employee who has accrued 
        compensatory time off authorized to be provided under paragraph 
        (1) shall, upon the voluntary or involuntary termination of 
        employment, be paid for the unused compensatory time in 
        accordance with paragraph (6).
          ``(6) Rate of compensation.--
                  ``(A) General rule.--If compensation is to be paid to 
                an employee for accrued compensatory time off, such 
                compensation shall be paid at a rate of compensation 
                not less than--
                          ``(i) the regular rate received by such 
                        employee when the compensatory time was earned, 
                        or
                          ``(ii) the final regular rate received by 
                        such employee,
                whichever is higher.
                  ``(B) Consideration of payment.--Any payment owed to 
                an employee under this subsection for unused 
                compensatory time shall be considered unpaid overtime 
                compensation.
          ``(7) Use of time.--An employee--
                  ``(A) who has accrued compensatory time off 
                authorized to be provided under paragraph (1), and
                  ``(B) who has requested the use of such compensatory 
                time,
        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.
          ``(8) Definitions.--The terms `overtime compensation' and 
        `compensatory time' shall have the meanings given such terms by 
        subsection (o)(7).''.

SEC. 3. REMEDIES.

  Section 16 of the Fair Labor Standards Act of 1938 (29 U.S.C. 216) is 
amended--
          (1) in subsection (b), by striking ``(b) Any employer'' and 
        inserting ``(b) Except as provided in subsection (f), any 
        employer''; and
          (2) by adding at the end the following:
  ``(f) An employer which violates section 7(r)(4) shall be liable to 
the employee affected in the amount of the rate of compensation 
(determined in accordance with section 7(r)(6)(A)) for each hour of 
compensatory time accrued by the employee and in an additional equal 
amount as liquidated damages reduced by the amount of such rate of 
compensation for each hour of compensatory time used by such 
employee.''.

SEC. 4. NOTICE TO EMPLOYEES.

  Not later than 30 days after the date of the enactment of this Act, 
the Secretary of Labor shall revise the materials the Secretary 
provides, under regulations published at 29 C.F.R. 516.4, to employers 
for purposes of a notice explaining the Fair Labor Standards Act of 
1938 to employees so that such notice reflects the amendments made to 
such Act by this Act.

                                Purpose

    The purpose of H.R. 1 is to amend the Fair Labor Standards 
Act of 1938 to allow compensatory time for all employees.

                            Committee Action

                             104th congress

    The Committee's consideration of allowing compensatory time 
began during the 104th Congress. As part of a series of 
oversight hearings on the Fair Labor Standards Act, the 
Subcommittee on Workforce Protections held a hearing on June 8, 
1995, on amending the Fair Labor Standards Act to provide 
private sector employers with the option of allowing employees 
to voluntarily choose to take paid compensatory time off in 
lieu of overtime pay. The following individuals testified at 
the hearing: Ms. Arlyce Robinson, Administrative Support 
Coordinator, Computer Sciences Corporation, Falls Church, 
Virginia; Ms. Kathleen M. Fairall, Senior Human Resource 
Representative, Timken Company, Randolph County, North 
Carolina; Ms. Sandie Moneypenny, Process Technician, Timken 
Company, Randolph County, North Carolina; Dr. M. Edith Rasell, 
Economist, Economic Policy Institute, Washington, D.C.; and Mr. 
Michael T. Leibig, Attorney-at-Law, Zwerdling, Paul, Leibig, 
Kahn, Thompson & Wolly, P.C., Fairfax, Virginia.
    On November 1, 1995, the Subcommittee on Workforce 
Protections held a hearing on H.R. 2391, a bill introduced by 
Representative Cass Ballenger to amend the Fair Labor Standards 
Act to allow compensatory time for all employees. The following 
witnesses testified on H.R. 2391: Mr. Pete Peterson, Senior 
Vice President of Personnel, Hewlett-Packard Company, Palo 
Alto, California; Ms. Debbie McKay, Administrative Specialist, 
PRC, Inc., McLean, Virginia; and Mr. Michael T. Leibig, 
Attorney-at-Law, Zwerdling, Paul, Leibig, Kahn, Thompson & 
Wolly, P.C., Fairfax, Virginia.
    On December 13, 1995, the Subcommittee on Workforce 
Protections approved H.R. 2391, as amended, by voice vote, and 
ordered the bill favorably reported to the Full Committee. On 
June 26, 1996, the Committee on Economic and Educational 
Opportunities approved H.R. 2391, as amended, by voice vote, 
and ordered the bill favorably reported by a roll call vote of 
20 yeas and 16 nays. H.R. 2391 was passed by the House, as 
amended, on July 30, 1996, but was not acted on by the Senate 
prior to the adjournment of the 104th Congress.

                             105th congress

    On January 7, 1997, Representative Cass Ballenger 
introduced H.R. 1, the Working Families Flexibility Act, with 
40 original cosponsors. The Subcommittee on Workforce 
Protections held a hearing on H.R. 1 on February 5, 1997. The 
following individuals testified at the hearing: the Honorable 
Kay Granger, Member of Congress representing the 12th district 
of Texas; the Honorable Tillie Fowler, Member of Congress 
representing the 4th district of Florida; the Honorable Sue 
Myrick, Member of Congress representing the 9th district of 
North Carolina; Ms. Christine Korzendorfer, Manassas, Virginia; 
Mr. Peter Faust, Clear Lake, Iowa; Ms. Linda M. Smith, Miami, 
Florida; Dr. Roosevelt Thomas, Vice President of Human 
Resources and Affirmative Action at the University of Miami, 
testifying on behalf of the College and University Personnel 
Association, Washington, D.C.; Ms. Diana Furchtgott-Roth, 
Resident Fellow at the American Enterprise Institute for Public 
Policy Research, Washington, D.C.; Mr. Robert D. Weisman, 
Attorney-at-Law, Schottenstein, Zox, & Dunn, Columbus, Ohio; 
Mr. Russell Gunter, Attorney-at-Law, testifying on behalf of 
the Society for Human Resource Management, Alexandria, 
Virginia; Ms. Karen Nussbaum, Director of the AFL-CIO Working 
Women's Project, Washington, D.C.; and Ms. Helen Norton, 
Director of Equal Opportunity Programs at the Women's Legal 
Defense Fund, Washington, D.C.
    On March 5, 1997, the Committee on Education and the 
Workforce discharged the Subcommittee on Workforce Protections 
from further consideration of the bill and approved H.R. 1, as 
amended, and ordered the bill favorably reported by a roll call 
vote of 23 yeas and 17 nays.

                     Committee Statement and Views

                               background

    The Fair Labor Standards Act (FLSA) \1\ was enacted in 
1938. Among its provisions is the requirement that hours of 
work by ``non-exempt employees'' beyond 40 hours in a seven day 
period must be compensated at a rate of one-and-one-half times 
the employee's regular rate of pay.\2\ Certain exceptions to 
the ``40 hour work week'' are permitted, under sections 7 and 
13 of the FLSA,\3\ for a variety of specific types and places 
of employment whose circumstances have led Congress, over the 
years, to enact specific provisions regarding maximum hours of 
work for those types of employment. In addition, the ``overtime 
pay'' requirement does not apply to employees who are exempt as 
``executive, administrative, or professional'' employees.\4\
---------------------------------------------------------------------------
    \1\ 29 U.S.C. Sec. 201-219.
    \2\ 29 U.S.C. Sec. 207.
    \3\ 29 U.S.C. Sec. Sec. 207, 213.
    \4\ 29 U.S.C. Sec. 213.
---------------------------------------------------------------------------
    Under the overtime pay requirement in the FLSA, overtime 
pay for employees in the private sector must be in the form of 
cash wages paid to the employee in the employee's next 
paycheck. This is contrary to the overtime pay provision for 
employees in the public sector. Section 7(o) \5\ provides that 
public agencies may provide paid compensatory time off in lieu 
of overtime compensation, so long as the employee or his or her 
collective bargaining representative has agreed to this 
arrangement and the compensatory time off is given at a rate of 
not less than one-and-one-half hours for each hour of 
employment for which overtime compensation is required.
---------------------------------------------------------------------------
    \5\ 29 U.S.C. Sec. 207(o).
---------------------------------------------------------------------------
    The difference in treatment between the private and public 
sectors under the FLSA is explained by the fact that the 
provisions applying the FLSA to the public sector were added in 
1985 and therefore included a recognition that the workplace 
and work force had changed greatly since the 1930's when the 
private sector provision was written.\6\ In 1985, Congress 
recognized that changes in the work force and the workplace had 
led many employers in the public sector to make compensatory 
time available and for their employees to choose compensatory 
time. As the Senate Labor Committee explained in including 
compensatory time for the public sector in the 1985 amendments:
---------------------------------------------------------------------------
    \6\ The changes to the FLSA authorizing compensatory time for 
public employees generally was preceded by legislation authorizing 
greater flexibility for federal employees. The Federal Employees 
Flexible and Compressed Work Schedules Act was passed in 1978, 
reauthorized in 1985 and made permanent in 1985.

          The Committee also is cognizant that many state and 
        local government employers and their employees 
        voluntarily have worked out arrangements providing for 
        compensatory time off in lieu of pay for hours worked 
        beyond the normally scheduled workweek. These 
        arrangements--frequently the result of collective 
        bargaining--reflect mutually satisfactory solutions 
        that are both fiscally and socially responsible. To the 
        extent practicable, we wish to accommodate such 
        arrangements.\7\
---------------------------------------------------------------------------
    \7\ Report on S. 1570, Committee on Labor and Human Resources, U.S. 
Senate, 99th Congress, First Session, Senate Report No. 99-159, p. 8.

    The Committee is certain that paid compensatory time off in 
lieu of overtime pay for hours worked beyond 40 in a week can 
provide ``mutually satisfactory solutions'' in the private 
sector no less than is the case in the public sector.
    Over the past two years, the Committee has heard compelling 
testimony from individuals who are covered by the overtime 
protections of the FLSA and who believe that a change in the 
law to allow paid compensatory time would be of great benefit 
to them.
    Ms. Arlyce Robinson, an Administrative Support Coordinator 
for Computer Services Corporation and an hourly non-exempt 
employee, described to the Subcommittee on Workforce 
Protections how she would like to be able to use compensatory 
time:

          I am here this morning to share with you my feelings 
        about the impact of a law that was created over 50 
        years ago to protect many of us in the workplace, the 
        Fair Labor Standards Act. I know that under this law, 
        as a non-exempt employee I am eligible for overtime if 
        I work more than 40 hours in a work week. And, while I 
        never turned down an opportunity to earn more money, 
        there have been times when I would have gladly given up 
        the additional pay to enjoy flexibility in planning my 
        work schedule, the same flexibility that my exempt 
        colleagues have had for some time. Let me give you an 
        example.
          In a few months, as all of you know, the weather 
        around Washington, DC, will become much colder. We are 
        likely to see some snow and ice. And if we have a 
        winter like the one we had two years ago, we will 
        likely see a great deal of snow and ice. If it snows on 
        a Monday or Tuesday--at the beginning of my workweek--
        and I can't get to work on one of those days, I know 
        that I can make up the hours that I missed by working 
        extra hours later in that same week--say on Thursday or 
        Friday. However, if it snows at the end of my workweek, 
        we have a different issue. Although my company would 
        like to allow me to make up the work during the 
        following workweek, the fact is that they can't allow 
        it without incurring additional costs. You see, if I 
        only worked 4 eight hour days--or 32 hours--the first 
        week, I would have to work 48 hours the following week 
        in order to have a full 80 hour paycheck for the two 
        week period. But right now under the Fair Labor 
        Standards Act, each one of the 8 hours worked over 40 
        in the second week would have to be paid on an overtime 
        basis. That's just too expensive for my company, given 
        the number of non-exempt employees that we have. So 
        since I can't make up the time in the second week, I 
        have to take vacation leave which keeps my paycheck 
        whole but gives me less vacation to use later--when I 
        would like to use it. My only other alternative is to 
        take leave without pay, which keeps my vacation intact, 
        but results in my losing money in my paycheck. And I do 
        need my paycheck!!
          * * * For the first 20 years of my career, I worked 
        in the public sector as a secretary and as an 
        administrative assistant in the DC public school system 
        and for the DC Office of Personnel. When I worked for 
        these agencies, I was able to earn and use compensatory 
        time. I can't earn that now * * * This lack of 
        flexibility is especially difficult for parents of 
        young children, both mothers and fathers, and, 
        particularly, for single parents. Doctor appointments 
        and school conferences can often only be scheduled 
        during work hours. For non-exempt employees, this often 
        means having to take sick leave or vacation leave to 
        have a few hours off to take care of family 
        responsibilities.\8\
---------------------------------------------------------------------------
    \8\ Hearings on the Fair Labor Standards Act before the 
Subcommittee on Workforce Protections, Committee on Economic and 
Educational Opportunities, U.S. House of Representatives, 104th 
Congress, First Session, Serial No. 104-46, pp. 180-181.

    Ms. Sandie Moneypenny, a process technician for Timken 
Company and an hourly non-exempt employee, described how having 
the option of choosing compensatory time could help her as a 
---------------------------------------------------------------------------
working mother:

          Compensatory time off for a working mother like 
        myself would be very helpful. If I had to leave work 
        because of a sick child, wanted to attend a teachers 
        conference, needed to take my child to the dentist or 
        just wanted time off to be with my family, I would have 
        the option without it affecting my pay.
          Today I can only use compensatory time in the week it 
        occurs, but as most of you know, life doesn't seem to 
        work that way. If I could bank my overtime, I wouldn't 
        have to worry about missing work if my child gets sick 
        on Monday or Tuesday. I also would only be postponing 
        valuable time off with my family when I have a busy 
        work week, because I could always take the time off at 
        a later date.\9\
---------------------------------------------------------------------------
    \9\ Ibid., p. 186.

      Ms. Deborah McKay, an Administrative Specialist, with 
PRC, Inc. testified about why she would like to have the option 
---------------------------------------------------------------------------
of selecting compensatory time in lieu of cash overtime:

          Under this proposal, an employee would be given the 
        option to use overtime compensatory time at a later 
        date when these family emergency type situations occur. 
        Personally, I would find this time useful in working on 
        term papers and projects for school as well as waiting 
        for the repairman. There is nothing more frustrating 
        than having to take a whole day of leave to have a 
        scheduled repairman show up--supposed to show up at 9 
        a.m. and then not show up until 3 or 4 in the 
        afternoon. * * *
          * * * [W]hat I am recommending is simple. * * * 
        [H]ave the FLSA amended by giving non-exempt and exempt 
        employees the option of time and a half pay or time and 
        a half of equal value off.\10\
---------------------------------------------------------------------------
    \10\ Ibid., pp. 416-417.

    Mr. Peter Faust of Clear Lake, Iowa, an hourly employee at 
a nonprofit facility for individuals who are mentally and/or 
physically disabled, related the difficulty that he and his 
wife have when struggling to balance family responsibilities 
with work schedules and the importance that additional time off 
---------------------------------------------------------------------------
would have for him and his coworkers:

          This amendment [H.R. 1] is a win-win for working 
        families and employers * * * Everyone I've talked to, 
        without exception, would like the choice of getting 
        overtime or comp time, and almost everyone I've asked 
        preferred comp time rather than overtime. * * *
          There are a lot of ways to make money in this country 
        and lots of ways to spend it, but there's only one way 
        to spend time with yourself, family or friends, and 
        that's to have the time to spend.
          In this country of choice, can the working families 
        have a choice? Some already do. Federal employees have 
        had the choice to save comp time since 1978. State and 
        local employees can save it too. Does our government 
        value the private working families in this country 
        enough to give us the same choice?\11\
---------------------------------------------------------------------------
    \11\ Hearing on H.R. 1, the Working Families Flexibility Act, 
before the Subcommittee on Workforce Protections, Committee on 
Education and the Workforce, U.S. House of Representatives, 105th 
Congress, First Session, February 5, 1997 (to be published).

    Ms. Linda M. Smith, a medical staff credentialing 
coordinator and secretary at the Bascom Palmer Eye Institute in 
Miami, Florida, expressed her ``wholehearted support'' for the 
development of a program which would enable her to have the 
---------------------------------------------------------------------------
option of comp time:

          With the implementation of the banked comp time 
        program, I could use my overtime hours to create time 
        for pregnancy leave for a second child, furthering my 
        education, taking care of a debilitated parent, or, 
        closest to my heart, creating special days with my 
        daughter. A goal of mine is to obtain my degree. My 
        employer allows me to take one class during working 
        hours, without pay. With accrued comp time, I could 
        take the class during working hours, with pay. Accrued 
        comp time would also allow me to take time off for 
        doctors' appointments, teachers conferences, or to care 
        for a sick child without having to use accrued sick 
        time. In this way, sick time could be saved for 
        catastrophic or long-term illnesses.\12\
---------------------------------------------------------------------------
    \12\ Ibid.

    Ms. Christine Korzendorfer, an hourly employee with TRW in 
Manassas, Virginia, told the Subcommittee how important it 
would be for her to be able to have the choice between 
---------------------------------------------------------------------------
compensatory time and overtime wages:

          This schedule as a hourly employee provides me with a 
        lot of overtime pay. This pay is important to me. 
        However, the time with my family is more important. If 
        I had a choice there are times when I would prefer to 
        take comp time in lieu of overtime. What makes this 
        idea appealing is that I would have a choice with the 
        legislation you are considering.
          Just recently, my son was ill and I had to stay at 
        home with him. I took a day of vacation which I would 
        have preferred to use for vacation! But I did not want 
        to take unpaid leave. * * * If I had the choice, I 
        would have used comp time in lieu of overtime for that 
        day off from work. Besides, I would have only had to 
        use about five and one-half hours of comp time to cover 
        that eight hour day.\13\
---------------------------------------------------------------------------
    \13\ Ibid.

    There is ample support for concluding that Ms. Robinson, 
Ms. Moneypenny, Ms. McKay, Mr. Faust, Ms. Smith, and Ms. 
Korzendorfer are not alone in wanting the option of being able 
to earn compensatory time off, rather than cash wages, for 
hours worked in excess of 40 in a workweek. A survey conducted 
in September, 1995 by Penn & Schoen Associates, Inc. found that 
75 percent of those surveyed favored a proposal to give workers 
the option of time off in lieu of overtime wages.\14\
---------------------------------------------------------------------------
    \14\ National poll conducted September 23-25, 1995, by Penn & 
Schoen Associates, Inc.

    Ironically, employees who are classified as exempt under 
the FLSA are not so restricted by law and often are permitted 
by their employers to have much more flexibility in their 
schedules than non-exempt employees. But for non-exempt 
employees, the law has denied them the flexibility that they 
---------------------------------------------------------------------------
need and want. As Ms. Arlyce Robinson summarized it:

          While the law was intended to protect us--and maybe 
        50 years ago it did--in today's business world it has 
        had the effect of creating the illusion of two classes 
        of workers. The term non-exempt is often misinterpreted 
        to mean ``less than professional.'' \15\
---------------------------------------------------------------------------
    \15\ Hearings on the Fair Labor Standards Act before the 
Subcommittee on Workforce Protections, Committee on Economic and 
Educational Opportunities, U.S. House of Representatives, 104th 
Congress, First Session, Serial No. 104-46, p. 181.

                            Committee Views

    H.R. 1 amends the FLSA to permit employers in the private 
sector to offer their employees the voluntary option to receive 
overtime pay in the form of paid compensatory time in lieu of 
cash wages. The legislation does not change the employer's 
obligation to pay overtime at the rate of one-and-one-half 
times the employee's regular rate of pay for any hours worked 
over 40 in a seven day period. The bill simply allows overtime 
compensation to be given in the form of paid compensatory time 
off, at the rate of one-and-one-half hours of compensatory time 
for each hour of overtime worked, and only if the employee and 
employer agree on that form of overtime compensation. As is the 
case where compensatory time is already used in the public 
sector, the employee would be paid, at the employee's regular 
hourly rate of pay, when the compensatory time is used.
    H.R. 1 would not alter current public sector use of 
compensatory time in any way. Rather, the legislation seeks to 
extend the option of paid compensatory time in lieu of overtime 
compensation to private sector employees, which is the same 
option that federal, state, and local government employees have 
had for many years under the FLSA, and which private sector 
employees overwhelmingly support. The legislation includes 
numerous protections for employees to assure that employees' 
choice and use of compensatory time is voluntary. Compensatory 
time, as provided in H.R. 1, is not a mandate on employers or 
employees. H.R. 1 simply gives employees and employers the 
opportunity to agree to this arrangement, an opportunity which 
is now denied to them by law.

Agreement

    Under H.R. 1, an employer and employee must reach an 
express mutual agreement that overtime compensation will be in 
the form of paid compensatory time. If either the employee or 
the employer does not so agree, then the overtime pay must be 
in the form of cash compensation.
    The agreement between the employer and employee must be 
reached prior to the performance of the work for which the 
compensatory time off would be given. The agreement may be 
specific as to each hour of overtime, or it may be a blanket 
agreement covering overtime worked within a set period of time.
    The bill allows two types of employer-employee agreements 
on compensatory time. Where the employee is represented by a 
recognized or certified labor organization, the agreement must 
be in the collective bargaining agreement between the employer 
and the recognized or certified labor organization. By 
referring to a labor organization which has been recognized or 
certified under applicable law, H.R. 1 includes any law 
providing for recognition or certification of labor 
organizations representing private sector workers in collective 
bargaining, including, at the federal level, the National Labor 
Relations Act and the Railway Labor Act.
    Where the employees are not represented by a recognized or 
certified labor organization, the agreement must be made 
between the employer and the individual employee. The bill 
specifies that any such agreement between the employer and an 
individual employee must be entered into knowingly and 
voluntarily by the employee, and may not be a condition of 
employment.
    The bill also requires that, with regard to agreements 
between employers and individual employees, the agreement on 
compensatory time between the employer and the employee must be 
affirmed in a written or otherwise verifiable statement. The 
latter is intended to allow computerized and other similar 
payroll systems to include this information, so long as the 
employee's agreement to take the overtime in the form of 
compensatory time is verifiable. The Committee does not intend 
that an agreement to take compensatory time could be purely 
oral with no contemporaneous record kept. To further assure 
that such agreements are authentic, H.R. 1 provides that, 
pursuant to the general recordkeeping authority of the 
FLSA,16 the Secretary of Labor has authority to prescribe 
the information which the records of such agreement must 
include and the period of time the records should be maintained 
by the employer.
---------------------------------------------------------------------------
    \16\ 16 29 U.S.C. Sec. 211(c).
---------------------------------------------------------------------------
    The assurance that the individual employee's agreement to 
take compensatory time in lieu of cash overtime pay is 
voluntary is further protected by provisions in the bill which 
allow an employee who has entered into such an agreement to 
withdraw it at any time. Thus an employee who agrees that all 
or a portion of the overtime hours he or she works will be 
compensated in this form may at any point withdraw from that 
arrangement, in which case any subsequent hours of overtime 
worked by the employee must be compensated in the form of cash 
compensation.
    Just as is the case with compensatory time as it has been 
approved and operates in the public sector,17 H.R. 1 does 
not require that the same agreement be entered with every 
employee, or that the employer agree to offer compensatory time 
to all employees. Opponents of compensatory time have claimed 
that this allows an employer to unfairly single out employees 
and to force them to take compensatory time in lieu of cash 
overtime against the employee's wishes. However, the bill's 
express prohibition on ``direct or indirect coercion'' and 
attempted coercion of employees (see discussion below) would 
prohibit an employer from conferring any benefit or 
compensation for the purpose of interfering with an employee's 
right to request or not request compensatory time. Thus, an 
employer may not single out employees for overtime work for the 
purpose of rewarding or punishing employees for their 
willingness or unwillingness to take compensatory time.18
---------------------------------------------------------------------------
    \17\ 29 C.F.R. Sec. 553.23 c.
    \18\ Obviously an employer also may not use any overtime policy, 
including compensatory time, to discriminate among employees for any 
reason prohibited by law. See testimony of Mr. Robert Weisman, Hearing 
on H.R. 1, the Working Families Flexibility Act before the Subcommittee 
on Workforce Protections, Committee on Education and the Workforce, 
U.S. House of Representatives, 105th Congress, First Session, February 
5, 1997.
---------------------------------------------------------------------------
    The opponents of compensatory time have argued that 
compensatory time should be denied to everyone, but if it is 
allowed at all, then ``low-wage'' workers and certain 
occupations should be excluded. The Committee believes that the 
requirement for mutual agreement by the employer and the 
employee and the employee protections in the bill ensure that 
compensatory time is voluntary.
    Furthermore, there are a great many workers who likely 
would be included in a national definition of ``low wage'' who 
want to have the option of paid compensatory time--and who feel 
perfectly capable of making that decision themselves. Indeed, 
some of the most forceful and compelling testimony before the 
Subcommittee on Workforce Protections in support of allowing 
workers the option of paid compensatory time was given by a 
``low wage worker,'' Mr. Peter Faust, who likely would be 
denied that option if all such workers were excluded from H.R. 
1.19 The Committee sees no reason to deny certain 
employees the option of compensatory time, based solely upon 
their level of income or their occupation.
---------------------------------------------------------------------------
    \19\ Testimony of Mr. Peter Faust, Hearing on H.R. 1, the Working 
Families Flexibility Act before the Subcommittee on Workforce 
Protections, Committee on Education and the Workforce, U.S. House of 
Representatives, 105th Congress, First Session, February 5, 1997.
---------------------------------------------------------------------------

Conditions on compensatory time

    The Committee intends that compensatory time be a matter of 
agreement between employers and employees and to that end, the 
law should permit employers and employees some flexibility in 
structuring compensatory time arrangements. H.R. 1 provides 
certain parameters for such compensatory time arrangements, 
primarily in order to assure that employees are fully 
protected, which apply whether the compensatory time agreement 
is with a labor organization or with an individual employee 
(see discussion above). The agreement between the employer and 
employee may include other provisions governing the 
preservation, use or cashing out of compensatory time, so long 
as these provisions are consistent with the Working Families 
Flexibility Act. To the extent that any provision of an 
agreement is in violation of the Working Families Flexibility 
Act, the provision would be superseded by the requirement of 
the Act.\20\
---------------------------------------------------------------------------
    \20\ This relationship between the agreement and the parameters 
stated in law is the same as applies to public sector compensatory 
time. See 29 C.F.R. Sec. 553.23 (a)(2).
---------------------------------------------------------------------------
    H.R. 1 provides that an employee may accrue no more than 
240 hours of compensatory time. This limit is designed to 
protect both employers and employees against accrual of 
excessive amounts of compensatory time liability. The Committee 
emphasizes that this 240 hour limit is the legal maximum that 
may be accrued. Employers may establish a lower limit for 
compensatory time accrual for their employees, and employees, 
of course, may agree to fewer hours of compensatory time, or 
decline compensatory time as the payment for overtime 
altogether.
    The bill also requires an annual ``cash out'' of all 
accrued compensatory time. Such an annual cash out also 
protects both employers and employees against accrual of 
excessive amounts of compensatory time liability. Unless an 
alternative date is established by the employer, the annual 
cash out date is the end of the calendar year (December 31) and 
the employee must be paid for the accrued compensatory time not 
later than the following January 31. The employer may establish 
an alternative annual cash out date, in which case the employer 
must pay the employee for any accrued and unused compensatory 
time within 31 days of the end of the 12 month period. Subject 
to continued agreement between the employer and employee, the 
employee may begin to accrue compensatory time anew after the 
cash out date.
    An employer may cash out some accrued compensatory time 
more frequently than annually. However, the employer must 
provide an employee with 30 days notice prior to cashing out 
the employee's accrued, unused compensatory time, and may only 
cash out accrued compensatory time which is in excess of 80 
hours.
    An employee may also choose to cash out his or her accrued 
compensatory time at any time. The employee may submit a 
written request to such effect to the employer, upon which 
request the employer must cash out the employee's accrued 
compensatory time within 30 days of receiving the request. 
There is no hour limit on the employee's ability to cash out 
accrued compensatory time.
    As described above, an employee who has an individual 
agreement with the employer regarding compensatory time may 
withdraw that agreement at any time. Similarly, an employer who 
offers compensatory time to employees may discontinue such 
policy upon giving employees 30 days notice, except where a 
collective bargaining agreement provides otherwise. In the 
event an employer does discontinue offering compensatory time, 
any hours of compensatory time already accrued by employees 
remain the employees' hours and must be so recognized by the 
employer.
    The bill provides that upon the voluntary or involuntary 
termination of employment, an employee's unused compensatory 
time must be cashed out by the employer, and is to be treated 
as a wage payment due and owing the employee. The bill further 
provides that any payment owed to an employee or former 
employee (whether by operation of the annual cash out of all 
accrued compensatory time, because of the employee's request to 
cash out accrued compensatory time, because of the employer's 
decision to cash out certain accrued compensatory time as 
described above, or because of the voluntary or involuntary 
termination of employment) shall be considered unpaid overtime 
compensation to the employee. In addition to making explicit 
that the remedies for unpaid overtime compensation under the 
FLSA apply, this provision also assures that any unpaid, 
accrued compensatory time is treated as unpaid employee wages 
in the event of the employer's bankruptcy. Thus any unpaid, 
accrued compensatory time would have the same priority claim 
and legal status as other employee wages under both the FLSA 
and the Bankruptcy Code. As described above, the payment for 
accrued compensatory time is owed to the employee or former 
employee when the claim for payment is made, and takes the same 
priority as other wages of that date.
    In all cases in which accrued compensatory time is cashed 
out, the rate of cash out must be the employee's regular rate 
when the compensatory time was earned or the employee's current 
regular rate, whichever is higher. Thus, if compensatory time 
is accrued during the course of a year and the employee has 
received an increase in his or her hourly rate during the year, 
the cash out rate at the end of the year would reflect the 
employee's increase in pay, even if the compensatory time was 
accrued prior to the pay increase.
    Opponents of H.R. 1 have raised concerns that compensatory 
time would reduce an employee's pension benefits. These 
concerns are unfounded. The overtime hours for which the 
employee receives compensatory time are hours ``for which the 
employee is paid or entitled to pay for the performance of 
duties for the employer.'' They are therefore defined as 
``hours of service'' under the Employee Retirement Income 
Security Act (ERISA),\21\ for which the employee would be 
credited for purposes of accrual, participation, and vesting of 
benefits. Obviously in some cases the employee has also not 
worked hours that he or she otherwise would have when the 
employee uses (as compared to accrues) paid compensatory time. 
Thus the employee's total hours worked may be reduced, not by 
the earning of compensatory time but by substituting the paid 
compensatory time off for other hours of work. If as a result, 
the employee works less total hours, the employee's total 
monetary earnings and credits for benefits may be less. But 
that effect is no different than any other decision by the 
employee (for example, refusing optional overtime work) that 
reduces the total number of hours actually worked by the 
employee. Of course, employees who choose to take compensatory 
time off have gained an advantage which enables them to spend 
more paid time off with their family or for whatever purpose 
they wish, which is not available to employees who choose cash 
wages.
---------------------------------------------------------------------------
    \21\ 29 C.F.R. Sec. 2530.200b-2.
---------------------------------------------------------------------------
    Similarly, opponents have raised concerns that compensatory 
time disadvantages an employee's eligibility for unemployment 
benefits, or the amount of unemployment benefits. H.R. 1 
clearly treats compensatory time as employee wages and any 
payments for accrued compensatory time would be treated as are 
other employee wages under state laws, for purposes of 
eligibility for unemployment benefits and determination of the 
amount of benefits. Receipt of compensation for accrued 
compensatory time when an employee's employment is terminated 
may, depending on state law on ``disqualifying income,'' defer 
receipt of unemployment benefits but would not diminish the 
total benefits to which the employee may be entitled. 
Furthermore, to attempt to dictate that compensatory time 
payments should not be considered in any unemployment benefit 
determination, as some have suggested, would be to turn 
existing federal policy on ``disqualifying income'' on its 
head, by dictating to the States how this form of employee 
wages should be treated and by dictating that these wages 
should not be considered as wages.
    Finally, H.R. 1 requires the Secretary of Labor to revise 
the posting requirements under the regulations of the FLSA to 
reflect the compensatory time provisions of the bill. This will 
help to ensure that employees are informed of the circumstances 
under which compensatory time may be offered by an employer, 
the employees' right to accept or decline such offer, and the 
employees' rights regarding the use of compensatory time.

Employee use of accrued compensatory time

    Under H.R. 1, an employee who has accrued compensatory time 
may generally use the time whenever he or she so desires. The 
only limitations which the bill puts on the use of compensatory 
time is that the employee's request to use compensatory time be 
made a reasonable time in advance of using it, and that the 
employer may deny the employee's request if the employee's use 
of the compensatory time would ``unduly disrupt'' the 
operations of the employer.
    These conditions on the use of accrued compensatory time 
are the same as those in current law which apply to 
compensatory time for public sector employees.\22\ Regulations 
issued by the Department of Labor define ``unduly disrupt'' as 
follows:
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    \22\ 29 U.S.C. Sec. 207(o).

          When an employer receives a request for compensatory 
        time off, it shall be honored unless to do so would be 
        `unduly disruptive' to the agency's operations. Mere 
        inconvenience to the employer is an insufficient basis 
        for denial of a request for compensatory time off. For 
        an agency to turn down a request from an employee for 
        compensatory time off requires that it should 
        reasonably and in good faith anticipate that it would 
        impose an unreasonable burden on the agency's ability 
        to provide services of acceptable quality and quantity 
        for the public during the time requested without the 
        use of the employee's services.\23\
---------------------------------------------------------------------------
    \23\ 29 C.F.R. Sec. 553.25.

    Court decisions regarding public sector compensatory time 
have also shown that the ``unduly disrupt'' standard is narrow 
and does not allow the employer to control the employee's use 
of compensatory time. In Heaton v. Missouri Department of 
Corrections, 43 F.3d 1176, 1180 (8th Cir., 1994), the Court of 
Appeals determined that banked compensatory time ``essentially 
is the property of the employee.'' The court held that the 
``unduly disrupt'' limitation on the employee's right to use 
compensatory time does not allow the employer to control the 
use of the employee's compensatory time or to force the 
employee to use compensatory time when the employee does not 
want to use it.
    Similarly, in Moreau v. Harris County, DC STexas, (No. H-
94-1427, 11/25/96) the District Court held that the employer's 
policy of forcing employees to use accrued compensatory time at 
the employer's convenience in order to reduce compensatory time 
balances was illegal. Regarding the employee's control of the 
use of accrued compensatory time, the Court said:

          A public employer may exercise control over an 
        employee's use of compensatory time only when the 
        employee's requested use of that time would disrupt the 
        employer's operations. An employee could attempt to 
        extort concessions from her employer by taking 
        compensatory time at a time when her presence is 
        critical to the operation, but no suggestion has been 
        made that the sheriff's office has been the victim of 
        abusive workers * * * Although an employer may 
        establish reasonable restrictions on vacations, sick 
        leave, and other time-off forms of compensation, it 
        cannot evade its statutory obligation for extra pay for 
        overtime work, even when the statute allows the extra 
        pay to be in the form of time off. Compensatory time is 
        far less amenable to management adjustment than the 
        others because the time off is in place of cash pay 
        required by statute.

    The Committee notes that a similar standard as is proposed 
in H.R. 1 limits an employee's right to take leave for medical 
treatments for the employee or a member of his or her family 
under the Family and Medical Leave Act. (``* * * the employee 
shall make a reasonable effort to schedule the treatment so as 
not to disrupt unduly the operations of the employer * * *'') 
\24\
---------------------------------------------------------------------------
    \24\ 29 U.S.C. Sec. 2612(e). As one district court recently said in 
construing these provisions of the Family and Medical Leave Act, ``The 
FMLA also does not give employees the unfettered right to take time off 
subject only to their own convenience without any consideration of its 
effect upon the employer.'' Kaylor v. Fannin Regional Hospital, 946 
F.Supp. 988, 999 (N.D. Georgia, 1996).
---------------------------------------------------------------------------
    Given the long history of this language in the FLSA with 
regard to compensatory time in the public sector and the 
adoption of similar language in the Family and Medical Leave 
Act, it is simply dishonest for the opponents of private sector 
use of compensatory time to claim that H.R. 1 allows the 
employer to control when compensatory time is used. The 
employer's right to deny compensatory time off under H.R. 1 is 
very limited. But the employer must have some ability to 
maintain the operations of the business. If that is not 
recognized in the law, then no employer will ever offer 
compensatory time as an option for employees and the 
Committee's efforts to respond to employees' desires to have 
this flexibility will be of no effect. Furthermore, providing a 
right to an employee to use compensatory time without any 
regard to workload or business demands is simply unfair to 
coworkers, who in many cases would have to handle the workload 
of the absent employee. Just as was the case in 1985 when 
workers in the public sector were allowed to use compensatory 
time, the Committee bill seeks ``to balance the employee's 
right to make use of comp time that has been earned and the 
employer's need for flexibility in operations.'' \25\
---------------------------------------------------------------------------
    \25\ Report on S. 1570, Committee on Labor and Human Resources, 
U.S. Senate, 99th Congress, First Session, Senate Report No. 99-159, p. 
11.
---------------------------------------------------------------------------

Enforcement and remedies

    As an amendment to the FLSA, the compensatory time 
provisions in H.R. 1 would be subject to the applicable 
enforcement and remedies of the FLSA. Section 15 (a)(2) of the 
FLSA \26\ makes it unlawful for any person to violate any 
provision of section 7, of which the compensatory time 
provisions of H.R. 1 would be a part. In addition, section 
15(a)(3) \27\ makes it unlawful to ``discharge or in any other 
manner discriminate against any employee because such employee 
has filed any complaint or instituted or caused to be 
instituted any proceeding under or related to'' the employee's 
rights under the FLSA.
---------------------------------------------------------------------------
    \26\ 29 U.S.C. Sec. 215(a)(2).
    \27\ 29 U.S.C. Sec. 215(a)(3).
---------------------------------------------------------------------------
    Section 16 (b) \28\ authorizes an action by an employee 
against his or her employer for any violations of section 7. 
The suit may be filed in any federal or state court. An 
employee may also file a complaint with the U.S. Department of 
Labor. The Department of Labor generally attempts to resolve 
such complaints; however, the Department of Labor may also sue 
the employer for damages on behalf of the employee or employees 
whose rights were violated, or may also seek injunctive 
relief.\29\ Section 16 (e) \30\ also authorizes the Secretary 
of Labor to seek civil penalties of up to $1000 per violation 
against an employer who ``willfully or repeatedly'' violates 
section 7. In any action in which the employee has been 
wrongfully denied overtime compensation, the FLSA authorizes 
damages equal to the amount of the unpaid compensation required 
by the FLSA and an equal amount as liquidated damages;\31\ 
liquidated damages may be reduced or eliminated if the court 
finds that the employer acted in good faith and had reasonable 
grounds for believing that he or she was in compliance with the 
FLSA.\32\ In any action brought by an employee, the employee 
may also be paid for his or her attorney's fees and costs.\33\
---------------------------------------------------------------------------
    \28\ 29 U.S.C. Sec. 216(b).
    \29\ 29 U.S.C. Sec. 217.
    \30\ 29 U.S.C. Sec. 216(e).
    \31\ 29 U.S.C. Sec. 216(b).
    \32\ 29 U.S.C. Sec. 260.
    \33\ 29 U.S.C. Sec. 216(b).
---------------------------------------------------------------------------
    H.R. 1 adds a prohibition to those already applicable under 
the FLSA. The bill prohibits an employer from directly or 
indirectly intimidating, threatening, coercing, or attempting 
to intimidate, threaten, or coerce any employee for purposes of 
interfering with the employee's right to take or not take 
compensatory time in lieu of cash overtime, or to use accrued 
compensatory time. Opponents of compensatory time have claimed 
that H.R. 1 would allow employers to force employees to take 
compensatory time against their will or to use accrued 
compensatory time at the employer's convenience. Those claims 
are contrary to the plain language of the bill.
    The language of H.R. 1 prohibiting intimidation, threats 
and coercion, or attempts thereto, is identical to prohibitory 
language in the Family and Medical Leave Act,\34\ and the 
Federal Employees Flexible and Compressed Work Schedules 
Act.\35\ The term ``intimidate, threaten, or coerce'' has been 
defined under those laws as ``promising to confer or conferring 
any benefit (such as appointment, promotion, or compensation), 
or taking or threatening to take any reprisal (such as 
deprivation of appointment, promotion, or compensation).'' \36\ 
Thus, H.R. 1 prohibits an employer, for example, from forcing 
employees to take compensatory time in lieu of monetary 
compensation by offering overtime hours only to employees who 
ask for compensation in the form of compensatory time.
---------------------------------------------------------------------------
    \34\ 5 U.S.C. Sec. 6385.
    \35\ 5 U.S.C. Sec. 6132.
    \36\ 5 U.S.C. Sec. 6385.
---------------------------------------------------------------------------
    The bill also creates a new remedy under the FLSA for 
employers who violate the anti-coercion language just 
described. Section 3 of H.R. 1 provides that an employer who 
violates the anti-coercion provision shall be liable to the 
employee for the employee's rate of compensation for each hour 
of compensatory time and an equal amount as liquidated damages. 
If the employee has already used some or all of the 
compensatory time, the amount to be paid as damages is reduced 
by that amount.
    Opponents of compensatory time have claimed that, while it 
may be prohibited conduct under H.R. 1, there is no sanction in 
H.R. 1 for an employer who either forces an employee to take 
compensatory time or denies the employee the right to use 
accrued compensatory time. In both cases they are wrong. An 
employee who is forced to take compensatory time may receive 
the amount of the employee's compensation for each hour of 
compensatory time plus an equal amount of liquidated damages, 
less the amount of compensation the employee has already 
received for those hours of compensatory time. Similarly, where 
an employee has been wrongfully denied use of accrued 
compensatory time, the employee or the Department of Labor may 
if necessary, seek injunctive relief and the employer who 
refuses to comply may be subject to civil penalties.
    In addition, there is a ``self-policing'' aspect: the 
employee retains his or her compensation and can demand to cash 
out at the employee's current rate of pay or the rate when the 
time was earned, whichever is higher. In short, the employer 
does not benefit by denying the employee the use of his or her 
compensatory time, and where necessary, there are effective 
sanctions under the bill and the FLSA for employees who violate 
the employee protections and other provisions of H.R. 1.

                                Summary

    H.R. 1 would give private sector employers and employees an 
option under the Fair Labor Standards Act which federal, state, 
and local governments have had for many years. H.R. 1 would not 
affect the compensatory time provisions already applicable to 
employees of federal, state and local governments. The bill 
would permit private sector employers to offer their employees 
the option of selecting paid compensatory time off in lieu of 
receiving cash overtime wages. Employees would be able to 
choose, based upon an agreement with the employer, to have 
their overtime compensated with paid time off.
    The bill would not change the 40 hour work week to affect 
the manner in which overtime is calculated. ``Non-exempt'' 
employees who work more than 40 hours within a seven day period 
would continue to receive overtime compensation at a rate not 
less than one and one-half times the employee's regular rate of 
pay. If the employer and the employee agree on compensatory 
time, then the paid time off would be granted at the rate of 
not less than one and one-half hours for each hour of overtime 
worked.
    H.R. 1 would provide new employee protections, in addition 
to those contained in current law, in order to protect against 
the coercive use of compensatory time. The bill requires any 
arrangement for the use of paid compensatory time to be an 
express mutual agreement between the employer and the employee. 
In the case of employees who are represented by a recognized or 
certified labor organization, the agreement must be between the 
employer and the labor organization. In other cases, the 
agreement is with the individual employee, and must be entered 
into knowingly and voluntarily by the employee, and may not be 
a condition of employment.
    The agreement for the use of compensatory time by an 
individual employee must be affirmed by a written or otherwise 
verifiable statement that the employee has chosen to receive 
compensatory time in lieu of overtime compensation. The 
agreement must be made, kept, and preserved in accordance with 
the recordkeeping requirements under section 11(c) of the Fair 
Labor Standards Act.\37\
---------------------------------------------------------------------------
    \37\ 20 U.S.C. Sec. 211(c).
---------------------------------------------------------------------------
    Any accrued compensatory time which has not been used by 
the employee by the end of each year (or the alternative 12 
month period as designated by the employer) must be paid for by 
the employer to the employee in the form of monetary 
compensation. Likewise, any unused, accrued compensatory time 
would be cashed out at the end of an employee's employment with 
the employer at the average regular rate received by the 
employee during the time period in which the compensatory time 
was accrued; or the final regular rate received by the 
employee; whichever is higher. An employee shall, upon the 
voluntary or involuntary termination of employment, be paid for 
the unused compensatory time at a rate of compensation not less 
than the average regular rate received by the employee during 
the time period in which the compensatory time was accrued, or 
the final regular rate received by the employee, whichever is 
higher.
    An employee may, at any time, withdraw from a compensatory 
time agreement with the employer. An employee may also request 
in writing that monetary compensation be provided, at any time, 
for accrued compensatory time which has not yet been used. 
Within 30 days of receiving such a written request, the 
employer shall provide the employee with monetary compensation 
for the unused, accrued compensatory time.
    A private sector employer must provide an employee with 30 
days notice prior to cashing out an employee's accrued, unused 
compensatory time. However, the employer may only cash out 
unused compensatory time accrued by an employee in excess of 80 
hours, unless the cash out is employee-initiated. A private 
sector employer must also provide employees with 30 days notice 
prior to discontinuing a policy of offering compensatory time 
to employees.
    For the purposes of enforcement, any unused compensatory 
time would be considered to be the same as wages owed to the 
employee. As with any other violation of the Fair Labor 
Standards Act, all of the remedies under the Act would apply. 
Any employer who directly or indirectly intimidates, threatens, 
or coerces any employee into selecting compensatory time in 
lieu of cash compensation, or who forces an employee to use 
accrued compensatory time would be liable to the employee for 
the cash value of the accrued compensatory time, plus an 
additional equal amount as liquidated damages, reduced by the 
amount of such rate of compensation for each hour of 
compensatory time used by the employee.

                      Section-by-Section Analysis

                         section 1. short title

    ``Working Families Flexibility Act of 1997.''

                      section 2. compensatory time

    Any employee may receive in lieu of monetary overtime 
compensation, compensatory time off at a rate not less than 
one-and-one-half hours for each hour of overtime worked.
    For the purposes of this subsection, the term ``employee'' 
does not include an employee of a public agency.
    An employer may provide compensatory time to employees only 
if such time is in accordance with the applicable provisions of 
a collective bargaining agreement between the employer and the 
labor organization which has been certified or recognized as 
the representative of the employees under applicable law.
    In the case of employees who are not represented by a labor 
organization which has been certified or recognized as the 
representative of such employees under applicable law, there 
must be an agreement arrived at between the employer and 
employee before the performance of the work and affirmed by a 
written or otherwise verifiable record maintained in accordance 
with section 11(c) of the Fair Labor Standards Act in which the 
employer has offered and the employee has chosen to receive 
compensatory time in lieu of monetary overtime compensation; 
and entered into knowingly and voluntarily by such employees 
and not as a condition of employment.
    An employee may accrue not more than 240 hours of 
compensatory time. Not later than January 31 of each calendar 
year, the employee's employer shall provide monetary 
compensation for any unused compensatory time accrued during 
the preceding calendar year, which was not used prior to 
December 31 of that year. Monetary compensation must be 
provided at the regular rate received when the compensatory 
time was earned or at the final regular rate, whichever is 
higher. An employer may designate and communicate to the 
employees a 12-month period other than the calendar year, in 
which case compensation shall be provided not later than 31 
days after the end of the 12-month period.
    An employer may provide monetary compensation for an 
employee's unused compensatory time in excess of 80 hours at 
any time after giving the employee at least 30 days notice. The 
compensation shall be provided at the regular rate received 
when the compensatory time was earned or the final regular 
rate, whichever is higher.
    Except where a collective bargaining agreement provides 
otherwise, an employer which has adopted a policy offering 
compensatory time to employees may discontinue such policy upon 
giving employees 30 days notice.
    An employee may withdraw from an agreement or understanding 
at any time. An employee may also request in writing that 
monetary compensation be provided, at any time, for all 
compensatory time accrued which has not yet been used. Within 
30 days of the written request, the employer shall provide the 
employee with the monetary compensation at a rate received when 
the compensatory time was earned or at the final regular rate, 
whichever is higher.
    An employer which provides compensatory time to employees 
shall not directly or indirectly intimidate, threaten, or 
coerce or attempt to intimidate, threaten, or coerce any 
employee for the purpose of interfering with such employee's 
rights to request or not request compensatory time off in lieu 
of payment of monetary overtime compensation for overtime 
hours; or requiring any employee to use such compensatory time.
    An employee who has accrued compensatory time off shall, 
upon the voluntary or involuntary termination of employment, be 
paid for the unused compensatory time.
    If compensation is to be paid to an employee for accrued 
compensatory time off, the compensation will be paid at a rate 
not less than the regular rate received by an employee when the 
compensatory time was earned or the final regular rate received 
by such employee, whichever is higher.
    Any payment owed to an employee for unused compensatory 
time shall be considered to be unpaid overtime compensation.
    An employee who has accrued compensatory time off and has 
requested the use of such compensatory time 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.
    The terms ``overtime compensation'' and ``compensatory 
time'' shall have the meanings given by subsection (o)(7) of 
the Fair Labor Standards Act.

                          section 3. remedies

    An employer which violates section 7(r)(4) of this bill 
shall be liable to the employee affected in the amount of the 
rate of compensation (determined in accordance with section 
7(r)(6)(A)) for each hour of compensatory time accrued by the 
employee and in an additional equal amount as liquidated 
damages reduced by the amount of such rate of compensation for 
each hour of compensatory time used by the employee.

                     section 4. notice to employees

    Not later than 30 days after the date of the enactment of 
this Act, the Secretary of Labor shall revise the materials 
provided to employers for purposes of a notice explaining the 
Fair Labor Standards Act of 1938 to employees so that the 
notice reflects the amendments made by this bill to the Act.

                        Explanation of Amendment

    The Amendment in the Nature of a Substitute is explained in 
this report.

                  Oversight Findings of the Committee

    In compliance with clause 2(l)(3)(A) of rule XI of the 
Rules of the House of Representatives and clause 2(b)(1) of 
rule X of the Rules of the House of Representatives, the 
Committee's oversight findings and recommendations are 
reflected in the body of this report.

                    Government Reform and Oversight

    With respect to the requirement of clause 2(l)(3)(D) of 
rule XI of the Rules of the House of Representatives, the 
Committee has received no report of oversight findings and 
recommendations from the Committee on Government Reform and 
Oversight on the subject of H.R. 1.

                           Committee Estimate

    Clause 7 of rule XIII of the Rules of the House of 
Representatives requires an estimate and a comparison by the 
Committee of the costs which would be incurred in carrying out 
H.R. 1. However, clause 7(d) of that rule provides that this 
requirement does not apply when the Committee has included in 
its report a timely submitted cost estimate of the bill 
prepared by the Director of the Congressional Budget Office 
under section 403 of the Congressional Budget Act of 1974.

                        Constitutional Authority

    The Fair Labor Standards Act of 1938 has been determined, 
by the Supreme Court, to be within Congress' Constitutional 
authority. In United States v. Darby, 312 U.S. 100 (1941) and 
OPP Cotton Mills, Inc., et al. v. Administrator of Wage and 
Hour Division of Department of Labor, 312 U.S. 126 (1941), the 
Supreme Court found that the regulation of hours and wages of 
work to be within the scope of Congressional powers under 
Article 1, Section 8, Clause 3 of the Constitution of the 
United States. In addition the Supreme Court has ruled that the 
Fair Labor Standards Act of 1938 does not violate the First or 
Fifth Amendments.
    H.R. 1, the Working Families Flexibility Act, amends the 
Fair Labor Standards Act of 1938. Because the Working Families 
Flexibility Act modifies but does not extend the federal 
regulation of overtime hours, the Committee believes that the 
Act falls within the same scope of Congressional authority as 
the Fair Labor Standards Act of 1938.

                Application of Law to Legislative Branch

    Section 102(b)(3) of Public Law 104-1, the Congressional 
Accountability Act (CAA), requires a description of the 
application of this bill to the legislative branch. H.R. 1 
amends the Fair Labor Standards Act of 1938 to provide 
compensatory time for all employees. Section 203(a) of the CAA 
applies the rights and protections of subsections (a)(1) and 
(d) of section 6, section 7, and section 12(c) of the Fair 
Labor Standards Act \38\ to covered employees and employing 
offices of the legislative branch. Therefore, the changes made 
by H.R. 1 to section 7 of the Fair Labor Standards Act \39\ 
apply to the legislative branch.
---------------------------------------------------------------------------
    \38\ 29 U.S.C. Sec. 206(a)(1) and (d); 207; 212(c).
    \39\ 29 U.S.C. Sec. 207.
---------------------------------------------------------------------------
    The Committee intends to make compensatory time available 
to legislative branch employees in the same way as it is made 
available to private sector employees under this legislation. 
The Committee notes that section 203(a)(3) of the CAA generally 
prohibits congressional employees from receiving compensatory 
time in lieu of overtime compensation; this provision was 
included in the CAA in order to make clear that employees in 
the legislative branch should follow the rules for private 
sector employees rather than for state and local government 
employees.

                       Unfunded Mandate Statement

    Section 423 of the Congressional Budget & Impoundment 
Control Act requires a statement of whether the provisions of 
the reported bill include unfunded mandates. The Committee 
received a letter regarding unfunded mandates from the Director 
of the Congressional Budget Office and as such the Committee 
agrees that the bill does not contain any unfunded mandates. 
See infra.

     Budget Authority and Congressional Budget Office Cost Estimate

    With respect to the requirement of clause 2(l)(3)(B) of 
rule XI of the House of Representatives and section 308(a) of 
the Congressional Budget Act of 1974 and with respect to 
requirements of clause 2(l)(3)(C) of rule XI of the House of 
Representatives and section 403 of the Congressional Budget Act 
of 1974, the Committee has received the following cost estimate 
for H.R. 1 from the Director of the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, March 6, 1997.
Hon. William F. Goodling,
Chairman, Committee on Education and the Workforce,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 1, the Working 
Families Flexibility Act of 1997.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Christina 
Hawley Sadoti.
            Sincerely,
                                              James L. Blum
                                   (For June E. O'Neill, Director).
    Enclosure.

H.R. 1--Working Families Flexibility Act of 1997

    Summary: H.R. 1 would amend the Fair Labor Standards Act 
(FLSA) to allow compensatory time off in lieu of monetary 
overtime compensation for private employees, so long as the 
arrangement is in accordance with a collective bargaining 
agreement or both the employer and the employee agree. Under 
current law, private-sector employers may not offer 
compensatory time off as a substitute for time-and-a-half pay 
for hours worked in excess of a 40-hour work week. Employees of 
public entities (excluding most employees of the legislative 
branch of the federal government) currently may receive time-
and-a-half compensatory time in lieu of time-and-a-half 
overtime pay under conditions similar to those specified in 
H.R. 1.
    CBO estimates that enactment of H.R. 1 would result in a 
small savings to the federal government. H.R. 1 would not 
affect direct spending or receipts; therefore, pay-as-you-go 
procedures would not apply. The bill would impose no new 
intergovernmental or private-sector mandates as defined in the 
Unfunded Mandates Reform Act of 1995 (UMRA).
    Estimated cost to the Federal Government: Enacting H.R. 1 
would save about $1 million annually, assuming that 
appropriations are reduced accordingly.
    Basis of estimate: H.R. 1 would apply directly only to the 
private sector, but it would probably have a minor impact on 
the legislative branch of the federal government. Within the 
legislative branch, employees who are not exempt from the FLSA 
may receive compensatory time in lieu of overtime pay in 
limited conditions governed, for the most part, by regulations 
that implement the Congressional Accountability Act. If H.R. 1 
were enacted, it is likely that these regulations would be 
rewritten to reflect more closely the options available to the 
private sector, thus giving the legislative branch greater 
flexibility in compensating employees for overtime hours 
worked. As a consequence, some legislative branch employees 
would opt for and employers would provide compensatory time 
instead of overtime pay. CBO estimates that the resulting 
savings would amount to about $1 million annually, beginning in 
fiscal year 1998.
    Additionally, H.R. 1 would require the Secretary of Labor 
to revise the materials that explain the Fair Labor Standards 
Act to employees to reflect the changes made by the Working 
Families Flexibility Act of 1997. These requirements are 
provided for in current law, and therefore would pose no 
additional costs to the Department of Labor.
    The budgetary impact of this legislation falls within 
budget subfunction 801 (Legislative Branch).
    Pay-as-you-go-considerations: None.
    Estimated impact on State, local and tribal governments: 
Because state and local governments would be excluded from the 
effects of this bill, it would have no impact on them. However, 
enactment of the bill would affect tribal governments, although 
any budgetary impacts are likely to be insignificant.
    The wage provisions of the FLSA apply to tribal governments 
on a case by case basis. Under current law, in cases where the 
FLSA applies (for example, when employees of tribal governments 
are not members of the tribe), tribal governments are not 
allowed to provide compensatory time in lieu of overtime pay. 
In these instances, the bill would grant tribal governments the 
flexibility to provide compensatory time and could reduce 
employment costs. At the same time, the bill would increase the 
cost of another FLSA mandate on tribal governments that 
requires them to post a notice explaining the FLSA to their 
employees. CBO estimates that these additional posting costs 
would be insignificant.
    Estimated impact on the private sector: By relaxing an 
existing mandate on employers to make cash payments for 
overtime, the bill would reduce employment costs for some 
employers. At the same time, the bill would increase slightly 
the cost of an existing mandate on employers that requires them 
to post a notice explaining the Fair Labor Standards Act to 
their employees. CBO estimates that any added cost to employers 
would be well under the $100 million annual threshold specified 
in UMRA and that the bill would most likely result in net 
savings for employers.
    Estimate prepared by: Federal Cost: Christina Hawley Sadoti 
and Mary Maginniss. Impact on State, Local, and Tribal 
Governments: John Patterson. Impact on the Private Sector: 
Kathryn Rarick.
    Estimate approved by: Robert A. Sunshine, Deputy Assistant 
Director for Budget Analysis.


         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3 of rule XIII of the Rules of the 
House of Representatives, changes in existing law made by the 
bill, as reported, are shown as follows (existing law proposed 
to be omitted is enclosed in black brackets, new matter is 
printed in italic, existing law in which no change is proposed 
is shown in roman):

                    FAIR LABOR STANDARDS ACT OF 1938

          * * * * * * *

                             maximum hours

  Sec. 7. (a) * * *
          * * * * * * *
  (r) Compensatory Time Off for Private Employees.--
          (1) General rule.--
                  (A) Compensatory time off.--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.
                  (B) Definition.--For purposes of this 
                subsection, the term ``employee'' does not 
                include an employee of a public agency.
          (2) Conditions.--An employer may provide compensatory 
        time to employees under paragraph (1)(A) only if such 
        time is provided in accordance with--
                  (A) applicable provisions of a collective 
                bargaining agreement between the employer and 
                the labor organization which has been certified 
                or recognized as the representative of the 
                employees under applicable law, or
                  (B) in the case of employees who are not 
                represented by a labor organization which has 
                been certified or recognized as the 
                representative of such employees under 
                applicable law, an agreement arrived at between 
                the employer and employee before the 
                performance of the work and affirmed by a 
                written or otherwise verifiable record 
                maintained in accordance with section 11(c)--
                          (i) in which the employer has offered 
                        and the employee has chosen to receive 
                        compensatory time in lieu of monetary 
                        overtime compensation; and
                          (ii) entered into knowingly and 
                        voluntarily by such employees and not 
                        as a condition of employment.
          (3) Hour limit.--
                  (A) Maximum hours.--An employee may accrue 
                not more than 240 hours of compensatory time.
                  (B) Compensation date.--Not later than 
                January 31 of each calendar year, the 
                employee's employer shall provide monetary 
                compensation for any unused compensatory time 
                off accrued during the preceding calendar year 
                which was not used prior to December 31 of the 
                preceding year at the rate prescribed by 
                paragraph (6). An employer may designate and 
                communicate to the employer's employees a 12-
                month period other than the calendar year, in 
                which case such compensation shall be provided 
                not later than 31 days after the end of such 
                12-month period.
                  (C) Excess of 80 hours.--The employer may 
                provide monetary compensation for an employee's 
                unused compensatory time in excess of 80 hours 
                at any time after giving the employee at least 
                30 days notice. Such compensation shall be 
                provided at the rate prescribed by paragraph 
                (6).
                  (D) Policy.--Except where a collective 
                bargaining agreement provides otherwise, an 
                employer which has adopted a policy offering 
                compensatory time to employees may discontinue 
                such policy upon giving employees 30 days 
                notice.
                  (E) Written request.--An employee may 
                withdraw an agreement described in paragraph 
                (2)(B) at any time. An employee may also 
                request in writing that monetary compensation 
                be provided, at any time, for all compensatory 
                time accrued which has not yet been used. 
                Within 30 days of receiving the written 
                request, the employer shall provide the 
                employee the monetary compensation due in 
                accordance with paragraph (6).
          (4) Private employer actions.--An employer which 
        provides compensatory time under paragraph (1) to 
        employees shall not directly or indirectly intimidate, 
        threaten, or coerce or attempt to intimidate, threaten, 
        or coerce any employee for the purpose of--
                  (A) interfering with such employee's rights 
                under this subsection to request or not request 
                compensatory time off in lieu of payment of 
                monetary overtime compensation for overtime 
                hours; or
                  (B) requiring any employee to use such 
                compensatory time.
          (5) Termination of employment.--An employee who has 
        accrued compensatory time off authorized to be provided 
        under paragraph (1) shall, upon the voluntary or 
        involuntary termination of employment, be paid for the 
        unused compensatory time in accordance with paragraph 
        (6).
          (6) Rate of compensation.--
                  (A) General rule.--If compensation is to be 
                paid to an employee for accrued compensatory 
                time off, such compensation shall be paid at a 
                rate of compensation not less than--
                          (i) the regular rate received by such 
                        employee when the compensatory time was 
                        earned, or
                          (ii) the final regular rate received 
                        by such employee,
                whichever is higher.
                  (B) Consideration of payment.--Any payment 
                owed to an employee under this subsection for 
                unused compensatory time shall be considered 
                unpaid overtime compensation.
          (7) Use of time.--An employee--
                  (A) who has accrued compensatory time off 
                authorized to be provided under paragraph (1), 
                and
                  (B) who has requested the use of such 
                compensatory time,
        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.
          (8) Definitions.--The terms ``overtime compensation'' 
        and ``compensatory time'' shall have the meanings given 
        such terms by subsection (o)(7).
          * * * * * * *

                               penalties

  Sec. 16. (a) * * *
  [(b) Any employer] (b) Except as provided in subsection (f), 
any employer who violates the provisions of section 6 or 
section 7 of this Act shall be liable to the employee or 
employees affected in the amount of their unpaid minimum wages, 
or the unpaid overtime compensation, as the case may be, and in 
an additional equal amount as liquidated damages. Any employer 
who violates the provisions of section 15(a)(3) of this Act 
shall be liable for such legal or equitable relief as may be 
appropriate to effectuate the purposes of section 15(a)(3), 
including without limitation employment, reinstatement, 
promotion, and the payment of wages lost and an additional 
equal amount as liquidated damages. An action to recover the 
liability prescribed in either of the preceding sentences may 
be maintained against any employer (including a public agency) 
in any Federal or State court of competent jurisdiction by any 
one or more employees for and in behalf of himself or 
themselves and other employees similarly situated. No employees 
shall be a party plaintiff to any such action unless he gives 
his consent in writing to become such a party and such consent 
is filed in the court in which such action is brought. The 
court in such action shall, in addition to any judgment awarded 
to the plaintiff or plaintiffs, allow a reasonable attorney's 
fee to be paid by the defendant, and costs of the action. The 
right provided by this subsection to bring an action by or on 
behalf of any employee, and the right of any employee to become 
a party plaintiff to any such action, shall terminate upon the 
filing of a complaint by the Secretary of Labor in an action 
under section 17 in which (1) restraint is sought of any 
further delay in the payment of unpaid minimum wages, or the 
amount of unpaid overtime compensation, as the case may be, 
owing to such employee under section 6 or section 7 of this act 
by an employer liable therefor under the provisions of this 
subsection or (2) legal or equitable relief is sought as a 
result of alleged violations of section 15(a)(3).
          * * * * * * *
  (f) An employer which violates section 7(r)(4) shall be 
liable to the employee affected in the amount of the rate of 
compensation (determined in accordance with section 7(r)(6)(A)) 
for each hour of compensatory time accrued by the employee and 
in an additional equal amount as liquidated damages reduced by 
the amount of such rate of compensation for each hour of 
compensatory time used by such employee.
          * * * * * * *
                             MINORITY VIEWS

                              introduction

    In our view, the inevitable consequence of enactment of 
H.R. 1 would be to require employees to work longer hours for 
less pay. Through entitled the ``Working Family Flexibility 
Act,'' H.R. 1 diminishes the flexibility of working families.
    Sponsors of this deceptively titled bill insist that it is 
replete with employee flexibility and protections. We beg to 
differ; there is much that this bill lacks as far as the 
interests of working families are concerned.
    H.R. 1 does not afford employers the right to grant leave 
in a single circumstance that is prohibited under current law. 
It does not guarantee that a single worker will be able to earn 
more time off. It does not guarantee to a single worker the 
right to use the time off that the legislation purports to 
afford workers the ability to earn. It does not adequately 
protect workers from being coerced into forfeiting their right 
to be paid in a timely manner for the overtime they have 
worked. And, this bill will inevitably result in a greater 
number of workers receiving no compensation whatsoever for 
their overtime work. In effect, the main consequence of this 
legislation is to extend workers a means, and in some cases the 
obligation, to provide to their employer an unsecured loan 
equal to up to 240 hours worth of time and a half pay. This is 
a bill about employer flexibility and power, plain and simple.
    If this bill were ``pro-worker'' and ``employee flexible,'' 
why would major worker representatives such as the AFL-CIO, the 
United Auto Workers, and the Teamsters oppose it? If this bill 
were so ``pro-family'' and ``gender friendly,'' why would such 
prominent women's advocates as the Women's Legal Defense Fund, 
the American Nurses Association, and Business and Professional 
Women, U.S.A., oppose it? If H.R. 1 were really for the benefit 
of workers, why did a representative of the National Federation 
of Independent Business engage in this exchange with Senator 
Paul Wellstone (D-MN) and Mr. Silverman, a witness opposed to 
this legislation, at a recent Senate hearing:

          Senator Wellstone. We have the flexibility in 
        existing law. Why would be want to move in the 
        direction that goes against the basic idea of overtime 
        pay for overtime work with all sorts of potential for 
        abuse around that very important principle when we 
        already have this existing flexibility? I mean, small 
        businesses and large businesses can take advantage of 
        that and the best do.
          Ms. Eckerly. Well, no. Real small businesses, our 
        members, cannot take advantage of that. A lot of 
        employees do not get paid overtime. Our members cannot 
        afford to pay their employees overtime. This is 
        something that they can offer in exchange that gives 
        them a benefit. (emphasis added)
          Senator Wellstone. But your employers can provide--
        you said you wanted this to be family-friendly, you 
        said you wanted this to be for employees. Right now, 
        whether it is a small business or a large business, you 
        have it within your power to be family-friendly. You 
        can let people vary their hours. Companies do that. In 
        Minnesota, I am proud of the business community. Many 
        large and small businesses do that now.
          Ms. Eckerly. But Senator, you cannot do that on a 
        biweekly schedule, for instance. Let us say you are a 
        building contractor, and because of the seasonal nature 
        of the work, you want your employees to work thirty 
        hours one week and fifty hours the next because of the 
        way it works. You do not want to have to pay in that 
        second week ten hours of additional overtime to your 
        employees.
          Senator Wellstone. But excuse me, this flexibility 
        does not require any time-and-a-half.
          Ms. Eckerly. No, but the reason why a contractor, for 
        instance, cannot on that second week have them work for 
        fifty hours is because he cannot afford to pay the 
        overtime for that ten additional hours.
          Senator Wellstone. But that is another whole issue.
          Ms. Eckerly. But let us say that means getting the 
        job.
          Mr. Silberman. If I may, Senator, it seems to me that 
        that is the most compelling evidence I have heard----
          Senator Wellstone. Against it.
          Mr. Silberman. As to why this bill will not permit 
        employee free choice.
          Senator Wellstone. That is correct.
          Mr. Silberman. If you are saying to people, ``we 
        cannot afford to pay overtime,'' then there is no 
        choice here. There is only one choice. If you have in 
        mind this contractor who goes to his employees and 
        says, ``I cannot afford to pay you, but I need you to 
        work fifty hours this week, otherwise the business is 
        going to go under,'' the notion that there is a lot of 
        employee free choice there seems to me to be a myth.
          Senator Wellstone. That is correct.

    We do not contend that all, most, or even a majority of 
employers are bad actors. Nevertheless, Federal labor law must 
protect employees, indeed even law-abiding employers, from the 
illegal and ill-begotten gain of unconscionable employers. In 
the real world, most employees lack the bargaining position, 
wherewithal, and nerve to insist that their employers respect 
employee needs and rights.
    In the final analysis, a more appropriate title for H.R. 1 
would be the ``Paycheck Reduction Act.''

H.R. 1 fails to provide genuine employee choice

    The Majority states that H.R. 1 gives employees ``the 
voluntary option to receive overtime pay.'' It does not. This 
bill gives the employer complete discretion over whether to 
offer overtime at all, the option of offering or denying it to 
any group or groups of employees, and the authority to withdraw 
the comp time plan at any time.
    The Majority also emphasizes the purported voluntary nature 
of their version of comp time. H.R. 1 requires ``express mutual 
agreement'' that overtime will be paid in lieu of cash. In the 
real world, many employees are reluctant or fearful to buck 
their employer's wishes regarding their terms and conditions of 
employment. This is especially true for some 85% of the 
workforce who do not have the protections of collective 
bargaining agreements. This point was emphatically made by 
Helen Norton of the Women's Legal Defense Fund:

          H.R. 1 does not give employees a true choice between 
        comp time and overtime pay, because in the real world, 
        employers will have the last word * * * Most hourly 
        workers have little bargaining power in the workplace 
        as it is. And they are also the most likely to rely on 
        overtime pay just to make ends meet. If they insist on 
        getting money instead of time, they run a very real 
        risk. If an employer would rather keep the money in the 
        bank, employees who do not accept comp time could find 
        that they just are not getting the hours they have 
        counted on, or are getting assigned to bad shifts, or 
        have otherwise put their jobs and livelihoods at risk. 
        * * * The bill gives unscrupulous employers a 
        substantial new opportunity to coerce employees into 
        taking time off even when they need or prefer to have 
        money in their paychecks instead.

    H.R. 1 permits employers to extend comp time in a manner 
that is wholly arbitrary and capricious. In the absence of a 
compelling business necessity, an employer should be required 
to extend that offer to all employees. There is simply no 
justification, short of condoning discrimination, for 
permitting an employer to offer comp time to one employee 
without extending that offer to all employees.

Employees cannot choose when to use comp time

    H.R. 1 provides that an employee may be denied the request 
to use compensatory time if it ``unduly disrupts'' the 
operations of the employer. The Majority states that the 
employer's prerogative to deny compensatory time off under H.R. 
1 is ``very limited,'' and they even attack opponents of their 
bill as ``dishonest'' for suggesting that H.R. 1 gives the 
employer control over when compensatory time is used.
    However, the Majority specifically rejected amendments 
offered by us to incorporate the leave standards of the Family 
and Medical Leave Act, which give employees real control over 
when they can take leave than H.R. 1. Ironically, the 
proponents of H.R. 1 have wrongly suggested that the leave 
standard under this bill is indistinguishable from the FMLA 
standard. In testimony before the Subcommittee on Employment 
and Training of the Senate Committee on Labor and Human 
Resources, Senator Tim Hutchinson (R-AR), a sponsor of S. 4, 
the Senate companion bill to H.R. 1, stated ``[w]e use the same 
standard in our bill as the Family and Medical Leave Act does 
with regard to disruption of work, so I think we are doing 
everything we can to accommodate concerns.'' \1\
---------------------------------------------------------------------------
    \1\ Senator Hutchinson in response to Senator Kennedy, ``Fair Labor 
Standards Act Reform: Review of Flexible Workplace Measures,'' Hearing 
Before the Subcommittee on Employment and Training of the Committee on 
Labor and Human Resources, U.S. Senate, February 4, 1997.
---------------------------------------------------------------------------
    However, a simple comparison of H.R. 1 to the FMLA standard 
reveals striking dissimilarities. Under the FMLA, an employee 
of a covered employer has an absolute right to take up to 12 
weeks of leave in the event of certain family or medical 
emergencies. An employer may not deny an employee such leave 
nor terminate an employee for exercising the right to take such 
leave.
    The FMLA further provides, in the case of planned medical 
treatment, that it is the duty of the employee to make a 
reasonable effort to schedule leave in a manner that does not 
disrupt unduly the operations of the employer. If, despite that 
reasonable effort, the employee cannot schedule leave at a time 
that does not disrupt unduly the operations of the employer, 
the employer has no right to deny the employee leave.
    Further, even where the leave under FMLA may be scheduled 
at a time that does not disrupt unduly the operations of the 
employer, it may only be done so subject to the approval of the 
health care provider. If the health care provider is unable to 
accommodate a treatment schedule that is more convenient to the 
employer, the employer may not infringe upon the employee's 
right. By contrast, under H.R. 1 an employer may deny the use 
of earned compensatory time to the employee whenever the leave 
would ``unduly disrupt'' the employer's operations; it is that 
plain.
    During Committee consideration of H.R. 1, Rep. Lynn Woolsey 
(D-CA) (along with Reps. Mink, Sanchez, and Tierney) offered an 
amendment that guaranteed that workers would be able to use 
comp time in circumstances that would otherwise qualify for 
leave under the FMLA or a similar State law. The amendment 
further provided that where an employee provided two weeks or 
more notice of the intent to use compensatory time, the 
employer may only deny that use when the employee's absence 
would cause ``substantial and grievous injury'' to the 
employer's operations. And, where the employee provided less 
than two weeks notice, the employer may deny the use of 
compensatory time when the employee's absence would ``unduly 
disrupt'' the employer's operations. This amendment, which was 
defeated on a party-line vote, would have provided working men 
and women the real flexibility they need to meet the 
responsibilities of work and home.
    Finally, a word about the public sector analogy cited by 
the Republicans. The Majority cites various cases and 
regulations applicable to the public sector standard for taking 
leave time. These precedents and regulations will not be 
controlling to the comp time provisions of this bill. Further, 
public sector employers operate in a substantially different 
setting than private sector employers. Public sector employers 
don't face the business cycles and competitive economic 
pressure of private sector employers. Further, public sector 
employees are generally organized and have substantial 
procedural protections to protect against arbitrary and 
capricious employer actions.

H.R. 1 offers inadequate protections and remedies

    In fiscal year 1996 alone, the Department of Labor (DOL) 
found overtime violations involving some 170,000 workers. In 
industries such as the garment industry, the law is more 
typically violated than obeyed. A 1994 survey by DOL found that 
78 percent of the garment contractors in the Los Angeles area 
violated overtime requirements. Despite a concerted and well-
publicized enforcement effort by DOL, a 1996 survey found that 
55 percent of the garment contractors still operated in 
violation of the overtime requirement. The agriculture industry 
has a similar history of abuse.
    To quote The Wall Street Journal:

          While employees like overtime pay, a lot of employers 
        don't. Violations are so common that the Employer 
        Policy Foundation, and employer-supported think tank in 
        Washington, estimates that workers would get an 
        additional $19 billion a year if the rules were 
        observed.
          That estimate is considered conservative by many 
        researchers because it assumes that only 10 percent of 
        employees not getting overtime should be * * * A Wall 
        Street Journal analysis of 74,514 cases brought by the 
        department from October 1991 to June 1995 found that 
        some industries, such as railroad and tobacco, had 
        almost no violations, while industries such as 
        construction and apparel were cited for illegally 
        denying overtime to one out of every 50 employees 
        during the period. Overall, nearly eight out of every 
        thousand workers, or 695,280 employees, were covered by 
        settlements, even though enforcement was limited.\2\
---------------------------------------------------------------------------
    \2\ ``Shortchanged: Many Firms Refuse to Pay for Overtime, 
Employees Complain,'' The Wall Street Journal, June 24, 1996.

    H.R. 1 will engender more overtime violations. Under 
current law, employers must pay workers in a timely manner for 
the work they perform. If the employee is not paid by the 
appropriate payday, there is no confusion as to the fact that a 
potential violation of the law has occurred. If H.R. 1 were 
enacted, enforcement of the overtime law will become even more 
problematic. Under current law, employees are typically paid 
for overtime shortly after the work is performed. It is well 
within the ability of most employees to be able to track the 
amount of overtime they have worked and the amount of money 
they may be owed. However, under a compensatory time system, 
employees may not be paid for their overtime for up to a year 
after the work is performed; the ability of workers to trace 
their earned time is dubious. And yet, there is no requirement 
in H.R. 1 that employers inform workers of the amount of 
compensatory time they have accrued. Rather, H.R. 1 seems to 
place the burden on the employee to track, for as long as a 
year, how much overtime the employee has worked and how much 
compensation the employee is due.
    If H.R. 1 makes it harder for employees to recognize when 
an overtime violation has occurred, it also substantially 
increases the need for resources available to those seeking to 
enforce the FLSA's overtime. Under current law, an employee is 
either paid for overtime work or is not. Where an employee has 
not been paid for overtime work, there may be an issue as to 
whether the employee was eligible for overtime pay and as to 
whether the overtime work was performed. Resolving those issues 
is not terribly difficult. If H.R. 1 is enacted, one must still 
make that determination as to whether an employee is eligible 
for overtime pay and whether the employee performed overtime 
work. In addition, however, one would have to determine whether 
an employer operated a comp time system, whether an employee 
had freely chosen comp time or had been coerced into accepting 
comp time, and whether the employee had been unlawfully coerced 
into using comp time or had been unlawfully denied the use of 
comp time. Even though an employee had received nothing for the 
overtime work performed, it may not be clear that there has 
been a violation of the overtime law until a full year after 
the overtime work was performed.
    Reps. Miller, Ford, and Tierney, offered an amendment to 
improve the H.R. 1 remedies to deter employer misconduct, and 
to strengthen the power of workers to achieve redress for 
employer abuse. The amendment addressed discrimination in 
offering the comp time. Additionally, the amendment provided 
that an employer who violates any part of the comp time 
provisions may be sued by an employee or by the Secretary of 
Labor. And, where the employer is found to be in violation, the 
amendment makes the employer liable for the amount of overtime 
compensation that would have been paid for overtime hours 
worked or the overtime hours that would have been worked by the 
employee (plus an additional equal amount as liquidated 
damages, other appropriate legal or equitable relief, and 
reasonable attorney's fees).
    An example demonstrates H.R. 1's flawed remedy section. 
Assume a worker received initial approval to use comp time to 
care for an elderly parent at home following a serious illness. 
At the last moment before the employee takes the comp time, the 
employer, without cause, revokes permission. Under H.R. 1, 
there is no remedy to compensate the employee, even if he had 
to pay for expensive alternative care.
    Finally, the amendment authorized the Secretary of Labor to 
prohibit employers who have a pattern or practice of violating 
the FLSA from offering comp time. The Republican Majority 
rejected these important employee protections and remedies.

Comp time jeopardizes the employee workweek

    Under H.R. 1, comp time is not considered ``hours worked'' 
for the purpose of calculating overtime. Consequently, 
employers would be able to manipulate the workweek to the 
detriment of the employee. For example, assume an employer uses 
3 comp days in a week. If the employee normally worked from 9 
to 5 on Monday through Friday and on a particular occasion took 
comp time Monday, Tuesday, and Wednesday, the employer could 
still require the employee to work 10 hours a day Thursday 
through Sunday.
    Further, since the employer is not required to count 
compensatory time off for purposes of calculating overtime, the 
employer would not have to pay time and a half for the 20 hours 
worked during the weekend. For a worker earning $10 an hour, 
the loss of overtime pay would be $100 for the weekend.
    To address this quandary, Rep. Miller (D-CA) offered an 
amendment to provide that used compensatory time shall be 
treated as hours worked for purposes of calculating overtime 
compensation. The amendment further provided that earned 
compensatory time may not be substituted for any other paid or 
unpaid leave to which the employee was entitled. Unfortunately, 
the Republican Majority rejected this amendment.

H.R. 1 is especially dangerous for vulnerable employees

    When the Committee considered H.R. 1, several amendments 
were offered by Democratic Members to ensure that comp time 
does not have the effect of undermining the income of those 
workers struggling to make ends meet and those workers most 
vulnerable to employer abuse.
    H.R. 1 applies only to wage employees, that is, those who 
are entitled to be paid overtime for hours worked in excess of 
40 hours a week. In 1995, the latest year for which we were 
able to obtain statistics, there were almost 60,000,000 hourly 
workers in the private sector. Almost two-thirds of those 
workers earned less than $10 an hour.\3\ Eighty percent of 
women earned less than $20,000 a year (approximately $10 an 
hour).
---------------------------------------------------------------------------
    \3\ U.S. Bureau of Labor Statistics, Hourly earnings of employed 
wage and salaried workers paid hourly rates by class of worker, 
detailed industry, sex, race, and Hispanic origin, 1995 annual 
averages.
---------------------------------------------------------------------------
    These are workers who, at one and the same time, are both 
more likely to be dependent upon overtime pay in order to make 
ends meet and who are least likely to be able to exercise much 
bargaining power at the workplace. If H.R. 1 has the effect we 
fear, these workers will lose the most.
    Rep. Owens (D-NY) offered an amendment to exempt employees 
making less than 2.5 times the minimum wage from the 
legislation.
    Rep. Payne (on behalf of himself, and Reps. Owens and 
Hinojosa) offered a second ``vulnerable employees'' amendment 
to exempt part-time, temporary, and seasonal employees 
(including employees in the construction, agricultural, and 
garment industries) from the bill. These are the classes of 
workers who most likely are today's victims of overtime 
violations. These are also the workers most likely to be 
coerced into accepting compensatory time and are least likely 
to be actually paid the compensatory time they have earned. 
Both the Owens and Payne amendments were summarily rejected by 
the Republican Majority.

H.R. 1 fails to safeguard employee wages and paid leave

    H.R. 1 poses a significant risk to employees who find that 
there is no money in the employer's coffers when they seek to 
collect their overtime wages or to use their comp time. The 
bill permits employers to defer paying anything for overtime 
work for up to one year. In industries that are characterized 
by thinly capitalized enterprises, the promise of compensatory 
time is likely to be illusory. Ironically, a witness for the 
National Federal of Independent Business (NFIB) provided the 
clearest statement regarding the pressures employers face that 
raise the potential for abuse in a compensatory time system:

          One-half of small business owners start their 
        business with less than $20,000, most of it coming from 
        their personal savings. Most small business owners do 
        not make a lot of money. * * * They survive on cash 
        flow, not profitability.
          * * * Of the 800,000 to 900,000 businesses that start 
        each year, half will be out of business within five 
        years.* * * \4\
---------------------------------------------------------------------------
    \4\ Statement of Susan M. Eckerly, Director of Senate Federal 
Government Relations, National Federation of Independent Business, ``S. 
4, The Family Friendly Workplace Act,'' Hearing before the Subcommittee 
on Employment and Training of the Committee on Labor and Human 
Resources, U.S. Senate, February 13, 1997.

    H.R. 1 provides that unpaid comp time shall be treated as 
unpaid wages for purposes of the Fair Labor Standards Act, 
only. Bankruptcy courts are bound by the Bankruptcy Code, not 
by the FLSA. Absent specific legislative instruction as to how 
the bankruptcy courts are to treat unpaid comp time, the courts 
are free to determine that matter for themselves. Indeed, 
notwithstanding the current language in the bill, there is 
nothing to prevent the courts from treating comp time as an 
unsecured loan. The fact that the Congress could have 
specifically directed the bankruptcy courts to treat comp time 
as unpaid wages, but did not do so, would lend credence to the 
view that the Congress did not intend to afford any protection 
for unpaid comp time. During the markup, Rep. Mink, along with 
Rep. Owens, offered an amendment specifically instructing the 
bankruptcy courts on how to treat unpaid compensatory time. In 
our view, adoption of this kind of amendment is essential if we 
are to provide protection for unpaid comp time in instances 
where under-capitalized employers go out of business. Technical 
excuses should not have blocked consideration of this critical 
protection.
    A second amendment offered by Rep. Miller (on behalf of 
Reps. Mink and Owens) would have permitted the Secretary of 
Labor to require employers who offer compensatory time to 
secure a payment bond, such as those typically required for 
public construction projects, for protection of the overtime 
compensation of such employees. Both these amendments were 
rejected by the Republican Majority.
    H.R. 1 invites abuse of existing leave policies, as well. 
While H.R. 1 provides that an employer may not require an 
employee to use compensatory time, it does not prohibit an 
employer from requiring that compensatory time be counted as a 
substitute for other forms of leave. For example, an employee 
who uses compensatory time may have that time also counted 
toward the employee's vacation leave, sick leave, or family and 
medical leave. It is clearly unfair to permit such a practice. 
It is akin to requiring an employee who used a day of sick 
leave to work an extra eight hours to make up for the day the 
employee was out while still charging the employee for having 
used a day's sick leave. If the intent of this legislation is, 
in fact, to afford greater flexibility to working families, it 
is counterproductive to allow this.

H.R. 1 would reduce employee benefits

    H.R. 1 fails to protect employee benefits for individuals 
who choose to take comp time. For example, employees who work 
fewer hours because they take comp time would receive lower 
employer contributions to a 401K plan. Similarly, overtime pay 
which would otherwise be credited to establish unemployment 
eligibility and benefits amounts would be forfeited.
    The Majority admits that comp time would defer receipt of 
unemployment benefits because it would be ``disqualifying 
income,'' but asserts that ``it would not diminish the total 
benefits to which the employee may be entitled.'' This, 
however, would only be true if the worker exhausted his or her 
unemployment benefits. Because all States require workers to 
actively seek work during unemployment, few workers exhaust 
their benefits. Therefore, under H.R. 1 an employee's hard 
earned wages from overtime are being used instead of 
unemployment insurance benefits to which they would have been 
entitled. This would essentially nullify the benefit of comp 
time in many cases where the worker became unemployed.

The Republican majority deliberately rejected improvements to the FMLA

    At the end of the last Congress, President Clinton sent a 
legislative proposal to the Congress promoting flexibility for 
working families by expanding the FMLA to provide an additional 
24 hours of leave. Workers could use such leave to participate 
in the educational activities of their children or to provide 
routine medical care to their children or elders. Unlike the 
Republican view of comp time, the President's proposal would 
ensure at least a modest increase in the highly popular 
approach to flexibility already afforded millions of working 
families. The ranking Democrat on the Committee, Rep. Clay (D-
MO) intended to offer an amendment which would have raised 
consideration of this proposed expansion of the FMLA. The 
Republican Majority made clear it would block such 
consideration solely on procedural grounds that are otherwise 
waivable. Consequently, Rep. Clay offered an alternative 
approach providing that employers who offer employees comp time 
must also provide employees with a right to take up to 24 hours 
of expanded family leave.
    While the Clay amendment could not directly force the issue 
of expanding the FMLA, it at least sought to assure that where 
employers offer comp time, employees would also be guaranteed 
the right to take a minimal amount of leave to participate 
further in their children's education or to provide care to 
their children and elders. The Clay amendment was defeated on a 
strictly party-line vote.

                               conclusion

    Prior to the Committee's consideration of H.R. 1, the 
Acting Secretary of Labor, Cynthia Metzler, sent a letter to 
Chairman Goodling articulating the Clinton Administration's 
fundamental objections to H.R. 1 and promising a veto if those 
objections are not met:

          Any comp time legislation must effectively and 
        satisfactorily address three fundamental principles: 
        real choice for employees; real protection against 
        employer abuse; and preservation of basic worker rights 
        including the 40-hour week * * *
          President Clinton will veto any bill that does not 
        meet these three fundamental principles. While the 
        President has called for and strongly supports 
        enactment of responsible comp time legislation, he will 
        not sign any bill--including H.R. 1--that diminishes 
        employees' rights to receive time-and-a-half overtime 
        premium pay when they work more than a 40-hour 
        workweek. Workers--not employers--must be able to 
        decide how best to meet the current needs of their 
        families. (See Exhibit A--[full text of letter])

    We emphatically concur with the Acting Secretary and will 
urge our colleagues to oppose H.R. 1, this proverbial ``Trojan 
Horse,'' when it reaches the House Floor.

                                   William L. Clay.
                                   Dale E. Kildee.
                                   Patsy T. Mink.
                                   Lynn Woolsey.
                                   Chaka Fattah.
                                   Carolyn McCarthy.
                                   Ron Kind.
                                   Harold E. Ford, Jr.
                                   George Miller.
                                   Matthew G. Martinez.
                                   Donald M. Payne.
                                   Robert E. Andrews.
                                   Bobby Scott.
                                   Carlos Romero-Barcelo.
                                   Ruben Hinojosa.
                                   John F. Tierney.
                                   Loretta Sanchez.
                                   Dennis J. Kucinich.

                               Exhibit A

                          U.S. Department of Labor,
                                        Secretary of Labor,
                                     Washington, DC, March 4, 1997.
Hon. William F. Goodling,
Chairman, Committee on Education and the Workforce, House of 
        Representatives, Washington, DC.
    Dear Chairman Goodling: We understand that your Committee 
will consider H.R. 1, the ``Working Families Flexibility Act of 
1997,'' on Wednesday, March 5. I am writing to emphasize the 
Administration's strong opposition to H.R. 1, and to urge your 
Committee not to order the bill reported.
    The Administration believes strongly that any legislation 
to authorize compensatory time--``comp time,'' or paid time-
off--under the Fair Labor Standards Act (FLSA) should be linked 
to expansion of the Family and Medical Leave Act (FMLA), as the 
President proposed during the last Congress. The FMLA provides 
important benefits to working families and has proved effective 
in meeting the needs of both families and businesses. And, 
unlike comp time, which would be optional, family and medical 
leave is a right that covered employers may not deny to 
eligible employees. Expanding FMLA to give working families the 
flexibility they need for greater involvement in the education 
of their children and elder care will go a long way toward 
achieving the stated goals of H.R. 1. The bill before your 
Committee does not include FMLA expansion, and it should.
    Any comp time legislation must effectively and 
satisfactorily address three fundamental principles: real 
choice for employees; real protection against employer abuse; 
and preservation of basic worker rights including the 40-hour 
workweek.
    Real choice for employees must include the right to choose 
whether to earn comp time or overtime premium pay; the right to 
take comp time when needed for FMLA purposes; the right to 
choose to use comp time for any purpose with two weeks notice 
unless its use would cause substantial injury to the employer; 
and the right to ``cash out'' accrued comp time for pay on 15 
days notice, as well as a prohibition against giving employers 
the unilateral right to cash out an employee's accrued comp 
time at their discretion. Real protection against employer 
abuse must include a number of protections that are entirely 
absent from H.R. 1, such as the exclusion of vulnerable workers 
and part-time, seasonal and temporary workers, including 
garment and construction workers; special protections in cases 
where the employer goes bankrupt or out-of-business; 
prohibitions against employers' substituting comp time for paid 
vacation or sick leave benefits, or penalizing employees who 
choose overtime premium pay instead of comp time; a reasonable 
limit on the number of bankable hours for comp time; damages 
that allow an employee to obtain adequate relief if denied the 
use of comp time or denied overtime assignments; and strong 
effective provisions for enforcement. Preservation of worker 
rights requires preserving the 40-hour workweek and the right 
to receive premium pay for overtime work.
    President Clinton will veto any bill that does not meet 
these three fundamental principles. While the President has 
called for and strongly supports enactment of responsible comp 
time legislation, he will not sign any bill--including H.R. 1--
that diminishes employees' rights to receive time-and-a-half 
overtime premium pay when they work more than a 40-hour 
workweek. Workers--not employers--must be able to decide how 
best to meet the current needs of their families.
    The Office of Management and Budget advises that there is 
no objection to the submission of this report.
            Sincerely,
                                        Cynthia A. Metzler,
                                         Acting Secretary of Labor.