A new proposal in Congress could change how many employers schedule and compensate hourly workers. The Thirty-Two Hour Workweek Act, introduced this week by Senator Bernie Sanders (I-VT) and Representative Mark Takano (D-CA), would gradually lower the federal overtime threshold from 40 hours to 32 hours.
The proposal has received attention because supporters argue that employees should share in productivity gains from artificial intelligence, automation, and other technology. Opponents, including Senator Bill Cassidy, have warned that the change could increase labor costs, raise prices, reduce hiring, and encourage offshoring.
For small and midsized employers, however, the most overlooked issue may not be the schedule. It may be the impact on employee health benefits.
The bill has not passed either chamber of Congress. It is a proposal, not current law. Still, it is worth understanding now because benefits eligibility, employer contributions, and ACA compliance can become difficult to manage when employee hours change.
What the Thirty-Two Hour Workweek Act Would Do
As reported by Newsweek, the bill would amend the Fair Labor Standards Act (FLSA) and phase in a lower overtime threshold:
- Year one: Overtime after 38 hours per week
- Year two: Overtime after 36 hours
- Year three: Overtime after 34 hours
- Year four: Overtime after 32 hours
Once fully phased in, a covered nonexempt employee who works 40 hours in a week would receive eight hours of overtime at time-and-a-half.
The bill would also introduce daily overtime nationwide:
- Time-and-a-half after eight hours in a day
- Double time after 12 hours in a day
This does not require every business to adopt a Monday-through-Thursday schedule. Employers could arrange 32 hours over four or five days, depending on their operations.
The proposal also says employers could not reduce an affected employee’s weekly compensation or benefits simply because the standard workweek was shortened.
Certain executive, administrative, and professional exempt employees would generally remain outside the bill’s overtime coverage under existing Department of Labor rules.
The Overtime Math Creates Immediate Pressure
For an employer currently scheduling a nonexempt employee for 40 hours, the fully phased-in proposal would make eight of those hours overtime hours.
The direct calculation is straightforward: eight hours paid at 1.5 times the regular rate adds a significant weekly premium. Depending on wage rates, scheduling practices, replacement staffing, and productivity assumptions, employers could face a roughly 20% increase in the cost of maintaining the same staffing model.
A small business cannot always absorb that increase. A contractor may need to raise prices. A restaurant may need to add another shift. A medical practice may need additional staff to maintain patient coverage. A manufacturer may need to reconsider production schedules or invest in automation.
The issue becomes more complicated because the bill’s no-pay-cut and no-benefit-cut provisions would limit one of the employer’s usual responses.
Why the No-Pay-Cut Provision Matters to Benefits
If weekly hours are reduced from 40 to 32, an employer may want to reduce compensation proportionally or modify benefits to offset the increased cost per hour. Under the proposal, that would generally not be permitted merely because the standard workweek changed.
That creates a financial squeeze:
- The employer faces higher overtime costs when covered employees work beyond the new threshold.
- Weekly compensation cannot simply be reduced to offset the change.
- Benefits cannot simply be reduced because the standard week became shorter.
- Health insurance premiums and employer contributions must still be funded from the company’s operating margin.
This does not mean every employer would automatically be required to maintain every benefit for every employee in every circumstance. Plan documents, employment classifications, collective bargaining agreements, and applicable federal and state laws would matter.
It does mean employers should not assume they can solve the problem by simply cutting benefits or changing eligibility after the fact.
The ACA Interaction Could Become the Hidden Compliance Problem
The Affordable Care Act adds another layer of complexity.
Many employers use 30 hours per week or 130 hours per month as the full-time standard for ACA employer-mandate purposes. For applicable large employers (generally those with at least 50 full-time employees and full-time equivalents), employees working 32 to 35 hours would generally remain full-time under the ACA framework.
That creates a potential collision:
- The proposed federal overtime standard would be 32 hours.
- The ACA full-time standard would still generally be 30 hours.
- Employees working 32 to 35 hours could remain full-time for ACA purposes.
- The employer could face less operating margin while still needing to offer affordable, minimum-value coverage to eligible employees.
An employer might consider reducing schedules below 30 hours to avoid overtime and reduce benefits costs. That strategy can create serious complications.
For an applicable large employer, dropping employees below the ACA full-time threshold may affect measurement-period calculations, tracking procedures, plan eligibility, affordability testing, and potential employer-mandate exposure. It can also create morale problems when employees lose coverage or move between eligibility categories from month to month.
For smaller employers that are not subject to the ACA employer mandate, the federal penalty exposure may be different. However, plan documents, carrier rules, state requirements, and the company’s own eligibility policy still matter.
This is why hours-based benefits planning should not be handled informally.
Daily Overtime Would Hit Shift-Based Businesses Especially Hard
The daily overtime provision may be more disruptive than the weekly threshold for some industries.
Healthcare, retail, restaurants, manufacturing, transportation, and other shift-based businesses often rely on 10-hour or 12-hour shifts. Under the proposed rules, those schedules could trigger daily overtime even when the employee does not exceed the weekly threshold.
For example, a business that schedules four 10-hour shifts could face overtime after the eighth hour of each workday. A 12-hour shift could include both time-and-a-half and double-time hours.
That affects more than payroll. It can influence:
- Which employees qualify for health benefits
- Whether employees remain consistently above eligibility thresholds
- Employer contribution budgets
- Staffing and scheduling systems
- Overtime projections used during benefits renewal
- Employee communications and enrollment procedures
Benefits administration becomes particularly difficult when one employee works 34 hours one week, 29 hours the next, and 38 hours during a busy period.
Small Employers May Have the Fewest Options
Large companies may be able to automate certain tasks, move work between departments, or hire additional staff. A small business with five, 20, or 50 employees may not have those options.
A small employer may need to choose among several uncomfortable alternatives:
- Pay more overtime
- Hire additional workers
- Reduce operating hours
- Redesign shifts
- Raise prices
- Reduce expansion plans
- Reevaluate the structure of its health benefits
The challenge is that cutting hours can affect employee access to coverage, while maintaining hours can increase overtime costs. Either choice requires a coordinated review of payroll and benefits.
Voluntary Trials Do Not Guarantee a National Mandate Will Work
Supporters point to several experiments involving shorter workweeks.
In the United Kingdom, 61 organizations participated in a voluntary 2022 trial involving approximately 2,900 workers. Researchers at the University of Cambridge reported that sick days fell by 65% and staff departures fell by 57% compared with the same period a year earlier.
San Juan County, Washington, also made a 32-hour workweek permanent in late 2025 after operating a pilot program. The county reported benefits but also acknowledged challenges involving scheduling, public-facing services, and maintaining coverage.
Those examples are useful, but they do not prove that a nationwide mandate would produce identical results. Voluntary participants may be better positioned to redesign workflows, select suitable roles, and test shorter schedules. A mandated change would affect industries, employers, and job functions with very different operating requirements.
What Employers Should Do Now
You do not need to change your benefits plan because of this proposal. You should, however, understand how your plan would respond if employee hours change.
Start with a benefits stress test:
- Review your plan’s definition of eligible employees. Is eligibility based on 30 hours, 32 hours, 35 hours, a measurement period, or another standard?
- Compare your plan documents with your payroll practices. Informal scheduling rules should not conflict with written eligibility provisions.
- Model employee hours at 29, 30, 32, 34, 36, and 40 hours per week.
- Calculate the employer contribution at each level. Include medical, dental, vision, life, and disability benefits.
- Review ACA measurement and affordability procedures if you are an applicable large employer.
- Identify shift patterns that could trigger daily overtime.
- Prepare clear employee communications before making any schedule or eligibility change.
- Consult qualified employment and benefits counsel before changing classifications, compensation, or plan eligibility.
Employers may also want to evaluate flexible funding and plan-design strategies, including ICHRA and CHOICE Arrangements, level-funded health plans, and minimum-value plan options. These approaches can provide additional flexibility, but they are not one-size-fits-all solutions. Each has eligibility, administration, underwriting, affordability, and compliance considerations.
Total Benefit Solutions Can Help You Prepare
The Thirty-Two Hour Workweek Act may change during the legislative process, or it may not advance at all. Similar proposals were introduced in 2021, 2023, and 2024, but none became law.
The practical lesson is still clear: your payroll strategy and benefits strategy cannot be separated.
At Total Benefit Solutions, we help small and midsized employers compare plan designs, review eligibility structures, evaluate contribution strategies, and prepare for changing regulations. We act as your independent benefits advocate so you can understand your options before a new rule or business decision creates an avoidable problem.
This article is for general informational purposes and is not legal, tax, or compliance advice. Speak with qualified counsel before changing employee schedules, compensation, classifications, or health plan eligibility.
Visit www.totalbenefits.net or call (215) 355-2121 to schedule a benefits strategy review. We will help you stress-test your plan before the rules — or your workforce needs — change.
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