Comp Time vs Overtime Pay: What Federal Law Actually Allows

Compensatory time off — comp time — is time off granted in exchange for overtime hours worked. Under federal law, private-sector employers cannot offer comp time instead of cash overtime pay, even if the employee agrees to it. Only state and local government employers can substitute comp time for cash overtime, and only under specific FLSA conditions.

The private-sector rule: cash only

The FLSA requires that non-exempt private-sector employees be paid 1.5× their regular rate in cash for every overtime hour. An employee cannot waive this right, and an employer cannot ask them to. A signed agreement accepting comp time in lieu of overtime cash in the private sector is void — the employee is still owed the overtime wages, and the waiver cannot be enforced. If you are a private-sector hourly (or non-exempt salaried) employee and your employer offers comp time instead of overtime pay, that is a wage violation.

The public-sector exception

State and local government employers may offer comp time at a rate of 1.5 hours of time off for every overtime hour worked, under FLSA Section 207(o). A public works employee who works 44 hours in a week earns 6 hours of comp time (4 overtime hours × 1.5). Conditions apply: the arrangement must be established through an agreement with the employee or their representative before the work is performed; comp time must accrue at the correct 1.5× rate; employees must be permitted to use accrued comp time within a reasonable period when it does not unduly disrupt operations; and once an employee reaches the applicable cap, the employer must pay cash for additional overtime.

The caps are 240 hours of accrued comp time for most public employees, and 480 hours for public safety officers, emergency response workers, and seasonal workers. Once an employee exceeds the cap, any further overtime must be paid in cash.

Flex time is not the same as comp time

Flex time — adjusting hours within the same workweek — is legal for private employers. If an employee works 10 hours Monday but leaves 2 hours early on Friday, the workweek total stays at 40 and no overtime is owed. Flex time only works within the same seven-day workweek: an employer cannot ask an employee to 'work off' overtime from last week by working fewer hours this week. Each workweek stands completely alone for FLSA overtime purposes.

Informal comp-time arrangements

The most common form of illegal comp time is informal: a manager tells an hourly employee to take it easy next week because of overtime worked this week. Even without a formal policy, this practice violates the FLSA. If the employee is ever audited or files a complaint, the employer faces back-wage liability for every underpaid week, plus liquidated damages equal to the unpaid overtime. Document any arrangement your employer offers in place of overtime pay, including who proposed it and when.

What to do if you are being offered comp time

If you are a private-sector non-exempt employee and your employer is offering comp time instead of overtime, calculate the cash you are owed using the overtime calculator. You can raise it with HR directly, send a demand letter, file a WHD complaint at dol.gov, or consult an employment attorney. The violation accrues with each underpaid pay period, so the longer it continues, the larger the back-pay claim grows.