Timely Decision

This story appears in the July 1997 issue of Entrepreneur. Subscribe »

Will small-business owners back their employees up against a wall and pressure them to take paid time off-called "comp time"-instead of paying them time-and-a-half for overtime work? That's the contention of the Clinton administration, congressional Democrats and the AFL-CIO, who are opposing GOP House and Senate bills that give employers the option of offering comp time-in lieu of pay-to employees.

Comp time is prohibited under the Fair Labor Standards Act (FLSA), established in 1938, which requires employers to pay time-and-a-half to nearly all hourly employees who work overtime. Both Republicans and Democrats agree the prohibition is an anachronism, but there are partisan differences over how to structure a comp-time provison.

The Republican-backed Working Families Flexi-bility Act (H.R. 1) would eliminate the comp-time restriction. That bill passed the House in March by a narrow margin, which bodes ill for any Republican effort to override the promised Clinton veto.

A veto, however, is not an issue until the Senate passes the bill. Although Sen. John Ashcroft's (R-MO) Family Friendly Work- place Act (S.4) passed the appropriate committee in March, Senate Democrats are likely to filibuster S.4 when it reaches the Senate floor, unless some significant changes are made.

The two Republican bills have primarily the same central features: They modify the FLSA to allow employers to offer employees one-and-a-half hours off in lieu of time-and-a-half pay for each overtime hour worked.

Employers would have to pay the value of the unused comp time at the end of the year, or workers could give the employer 30 days' notice and claim the balance in cash. The bills also give employers the same right to "cash out" a worker's accrued comp time at their discretion; however, that applies only to time accrued over 80 hours.

The Opposition

Clinton and organized labor groups both object to the bills. First, although the bills make it unlawful to "intimidate, threaten or coerce" an employee, they fear that the employer could pressure a worker to take comp time in lieu of cash or force an employee to use the comp time at the employer's convenience.

Second, opponents believe the GOP bills pay too much heed to employer convenience. The bills allow an employer to turn down a request to use comp time if the employee's absence "would unduly disrupt the operations of the business."

In a letter to the chairman of the House Committee on Education and the Workforce, before the House bill was passed, Acting Secretary of Labor Cynthia Metzler stated the administration's view was that employees should be allowed to take comp time as long as it doesn't cause "substantial injury to the employer." That's a much narrower standard than what's provided for in H.R. 1.

Despite the arched backs on both sides of the issue, however, a compromise seems likely, especially when using past Congressional actions as a yardstick: Over the past few years, Congress has been quick to pass seemingly controversial bills because of their perceived appeal to women.

SBA Update

Women business owners looking for capital but afraid of being rejected by banks got a boost last year when the Small Business Administration's Women's Prequalification Pilot Loan Program went national (see "Entrepreneurial Woman," February). Nonetheless, some women worried that because local SBA offices were given the choice of whether or not to adopt the program, it might not come to their area. The concerns of many may be over; the SBA recently reported that 50 offices nationwide have picked up the program.

Under the Prequalification Program, nonprofit intermediaries help applicants develop business plans and loan packages, then submit them to the SBA. If the SBA finds the borrower is qualified, it issues a prequalification guarantee letter the loan applicant can then take to banks. For more information on how to apply, contact your local SBA field office or call (800) 8-ASK-SBA.

Contact Sources

Sen. John Ashcroft, 316 Hart Senate Bldg., Washington, DC 20510, john_ ashcroft@ashcroft.senate.gov