FLSA Working Hours Reform: Worker Well‐Being Effects in an Economic Framework

• DOI: http://doi.org/10.1111/irel.12112
• Published date: 01 October 2015
• Date: 01 October 2015

FLSA Working Hours Reform: Worker

Well-Being Effects in an Economic Framework*

LONNIE GOLDEN

This article discusses a model developed to predict the effects of recently pro-

posed amendments to the FLSA workweek and overtime provisions. The model

contrasts allowing compensatory time for overtime pay for private nonexempt

employees to “rights to request”reduced hours. Hours demanded are likely to rise

for workers who request comp time, undermining the intention of family-friendli-

ness and alleviating overemployment, unless accompanied by offsetting policies

that would prevent the denied use or forced use of comp time and that resurrect

some monetary deterrent effect. A unique survey shows that the preference for

time over money and comp time is relatively more prevalent among exempt, long

hours and women workers; thus, worker welfare is likely better served if comp

time were incorporated into an individualized, employee-initiated right to request.

Introduction and Overview: The Current and Future FLSA

Several reform proposals are currently before the United States Congress

that would amend the Fair Labor Standards Act (FLSA). The standard work-

week and overtime provisions of this law that define working lives in the

United States have not been amended since 1985. There are fundamental polit-

ical differences over how to amend the FLSA. On the one side, the House

Representatives passed H.R. 1406 in May of 2013; its companion proposal,

the “Family Friendly and Workplace Flexibility Act”(S. 1626), has been intro-

duced in the Senate. These bills would amend the FLSA to allow private-

sector employers to substitute compensatory (comp) time for overtime pay, if

an employee signs on to such an agreement. Employers would compensate

employees with future time off at the rate of 1.5 hours for every hour of over-

*The author’saffiliation is Penn State University—Abington College, Abington, Pennsylvania. Email:

Lmg5@psu.edu.

The author would like to thank the anonymous referees, the editor, Peter Berg, Tesfayi Gebreselassie,

and Ross Eisenbrey. All views expressed are the author’s.

INDUSTRIAL RELATIONS, Vol. 54, No. 4 (October 2015). ©2015 Regents of the University of California

Published by Wiley Periodicals, Inc., 350 Main Street, Malden, MA 02148, USA, and 9600 Garsington

Road, Oxford, OX4 2DQ, UK.

717

time worked; public-sector employers were granted this option in the 1985

amendment

1

. Virtually identical legislation introduced in the Senate (S.1623)

would institute a “flexible credit-hour program”that would allow an employee to

work excess hours beyond their typical, nonovertime number of required hours, in

order to build up hours of paid time off to be taken at a later date, at straight time

value. However, a worker’s use of accrued comp time credits can be denied if the

use would “unduly disrupt”the operations of the business or if the worker has not

notified their employer within what the latter regards as “a reasonable amount of

notice prior.”

The other side of the debate on the proposed amendments regards these propos-

als as largely a “wolf in sheep’s clothing,”designed to benefit employers with little

if any benefit to employees, if not harm.

2

This side has proposed alternative FLSA

reforms, such as “The Healthy Families Act”(H.R. 1286/S. 631), a national paid

sick days minimum standard, to earn up to seven job-protected paid sick days

annually, and “The Paid Vacation Act”(H. R. 2096), which would require that

employers provide a minimum of one week of paid annual leave to eligible

employees. More pertinently, this side has introduced “The Flexibility for Work-

ing Families Act”(H.R. 2559, S. 1248), which would institute an individual

employee the “right to request”a change in four terms of employment: the number

of work hours, daily scheduling times or being on call, location where the

employee is required to work, and length of notification the employee receives of

work schedule assignments.

3

The burden would be placed on an employer to:

1

In 2015, there is a proposed update of the U.S. Department of Labor regulations last visited in 2004,

that set minimum salary levels for a job to be considered exempt and also a maximum salary level to be

considered covered. Other FLSA regulatory reforms covered the issues of compliance and potential viola-

tions, such as mis-classification, as “exempt”(e.g., Levine and Lewin 2006; Belman and Belzer 1997), off-

the-clock work (Faraz, Shamsi, and Bashir 2013) and guaranteeing minimum weekly hours for hourly work-

ers, particularly in retail trade (Lambert, Haley-Lock, and Henly 2012).

2

Amendments in earlier comp-time proposals for private-sector employees provided double damages to

workers if they were coerced into selecting comp time over pay, and excluded workers with fewer than

1000 hours per year; however, they had allowed far more accumulation of credits per annum than the cur-

rent bills’80 or 160 hours. In the decades prior to the comp-time proposals, there were reform proposals to

raise the overtime pay premium up to at least double time (see Whittaker 2005; Hamermesh 2006). The

2011 “Payroll Fraud Prevention Act”(S.770) would eliminate current protections allowing employers to

exclude independent contractors in their workforces from overtime pay requirements.

3

The legislation is modeled after the statutory right to request flexible work arrangements adopted in

Anglo countries abroad, including the UK, New Zealand, Australia, and Northern Ireland. The most com-

mon request is for a reduced workweek and the vast majority of employee requests are indeed granted by

employers (Boushey 2011). Vermont is the first state to allow employees to request arrangements to

telecommute, job share, work part time, or adjust their schedules. San Francisco is the first city to have a

“right-to-request”ordinance: employers with twenty or more staff provide employees in caregiver roles a

right to request a predictable or flexible work schedule. On July 14, 2015, the "Schedules that Work" Act

was re-introduced into both houses of Congress, expanding the scope of work scheduling modifications that

could be requested (see footnote #37).

718 / LONNIE GOLDEN

respond to a written request “within a reasonable period”; deny the request only

with sufficient reason; and propose an alternative change to the employee’s hours,

times, place, or notification. In addition, an employee’s“right to refuse”added

hours, such as mandatory overtime, was proposed in previous bills, but the scope

covered only selected health-care occupations.

This paper addresses whether a blend of all these proposals might serve well

as comprehensive FLSA reform. Can we preserve the original intent of the

FLSA—inclusive labor law to protect workers with little bargaining leverage

from “starvation wages and intolerable hours,

4

while also modifying it to take

account of the increasing heterogeneity of work-hours preferences in the work-

force? The FLSA overtime rules were enacted to address a chronic market fail-

ure—a labor market that often proved unable to transform extended

workweeks into work opportunities for the unemployed or underemployed. It

was designed to allow employers the latitude to use unlimited overtime hours,

as long as they were willing to pay the premium.

5

It applied a monetary incen-

tive rather than statutory deterrent, ostensibly to make the employer bear much

of the potential marginal social spillover costs—reduced employment, health,

and nonwork (leisure) time.

6

While most advocates of reform agree it is desirable to make work hours

more “flexible,”the question of focus here will be on which set of FLSA

amendments would be most beneficial for the more than 80 million nonexempt

workers in the United States, and also perhaps, for some “exempt”workers.

Which bills would live up to their own titles suggesting concern for well-being

and flexibility for employees?

7

Such an analysis may dispassionately frame

and therefore help to depolarize the political discussion.

4

Bernstein and Eisenbrey (2014) argue that the initial law protected leisure, family, and social time,

without actually forbidding employers from scheduling overtime work, and that the “salary test”must be

updated to continue this also see Linder (2002).

5

See Ehrenberg (1986) and Rottenberg (1995) for contrasting views of the role of hours regulation.

6

See Bernstein and Eisenbrey (2014).

7

Estimates of the number of workers covered by the FLSA that are also “nonexempt”from the hours

tracking and overtime pay provisions are, by nature, scarce and imprecise, given the gray areas and discrep-

ancies in implementation by employers but could be as many as 80 million workers (Hamermesh 2002).

The U.S. Government Accountability Office (1999) estimated that between 20 and 27 percent of the full-

time workforce were bona fide executive, administrative, or professional employees that qualify under the

“white-collar exemption.”The Wage and Hour Division of the U.S. Department of Labor estimated that

about 67 percent of those employed were “nonexempt.”In 2002, there were an estimated 67 million

employees that were potentially nonexempt and an estimated 31 million were potentially exempt (Mayer

2004). The GAO (1999) considered employers’request to add a new exempt category—the knowledge

worker—if they were highly paid and highly skilled. After this, the Bush administration chose to exempt

“highly compensated”employees whose salary was above $100,000, even if they mainly performed manual

or clerical work. Various court decisions have swung back and forth regarding which specific occupations

are “exempt”or covered and what is considered “covered”time as work.

FLSA Hours Reforms and Economic Well-Being / 719