Comp hours, short for compensatory hours or comp time, are paid time off that a public-sector employee earns instead of receiving cash for overtime work. Under the Fair Labor Standards Act, every overtime hour converted to comp time must be credited at one and a half hours of leave, mirroring the time-and-a-half rate the employer would otherwise pay in cash. Private-sector hourly employees generally cannot be paid this way; the arrangement is reserved for state and local government workers, with a separate framework covering federal employees.
How the 1.5x Credit Works
The math is fixed. For every hour worked beyond 40 in a workweek, the employee banks at least 1.5 hours of paid leave. Ten overtime hours become 15 banked hours. Twenty overtime hours become 30. An hour-for-hour swap would shortchange the worker and violate federal law, because comp time has to carry the same premium that cash overtime carries.1eCFR. 29 CFR Part 553 Subpart A – Section 7(o) Compensatory Time and Compensatory Time Off
Those hours are not a perk. They are earned wages held in a different form, with a real dollar value tied to the employee’s pay rate.
Who Can Legally Earn Comp Hours
The FLSA limits comp time to employees of public agencies: state governments, local governments, and interstate governmental agencies. A private-sector employer cannot substitute comp time for cash overtime pay for a non-exempt worker.2Office of the Law Revision Counsel. 29 USC 207 – Maximum Hours A private employer who tells hourly staff to “take Friday off instead of getting overtime pay” is violating the FLSA and exposes the company to back-pay liability plus an equal amount in liquidated damages, roughly doubling the bill.3Office of the Law Revision Counsel. 29 U.S. Code 216 – Penalties
Federal employees have their own comp time framework under Title 5 of the U.S. Code, administered by the Office of Personnel Management, with different accrual rules and a 26-pay-period use-or-lose window. The FLSA rules covered here apply specifically to state and local government employees.
Salaried Exempt Employees Are a Separate Case
If you’re a salaried exempt employee (someone who meets the executive, administrative, or professional exemptions), you aren’t covered by the FLSA’s overtime provisions, so the Section 207(o) comp time restrictions don’t apply to you either. A private employer can informally give an exempt worker time off after a busy stretch without breaking federal law. It isn’t technically “comp time” under the statute; it’s just a time-off policy. The one hard line is the salary basis test: an exempt employee must receive the full predetermined salary for any week in which any work is performed, and the employer cannot dock pay for working fewer hours in a given week.4U.S. Department of Labor. Fact Sheet 17G – Salary Basis Requirement and the Part 541 Exemptions Under the Fair Labor Standards Act Extra time off is fine. Pay reductions are not.
An Agreement Has to Be in Place First
Even in public-sector jobs, an employer cannot decide on its own to pay in comp hours instead of cash. A valid agreement must exist before the overtime is worked.2Office of the Law Revision Counsel. 29 USC 207 – Maximum Hours
For unionized employees, the arrangement has to appear in a collective bargaining agreement, memorandum of understanding, or similar agreement between the agency and the employees’ representative, and the terms cannot contradict FLSA requirements.1eCFR. 29 CFR Part 553 Subpart A – Section 7(o) Compensatory Time and Compensatory Time Off For non-union employees, the employer and employee must reach an individual agreement or understanding before the overtime is performed. An employer can also make acceptance of comp time an express condition of employment at hire.
Without that prior agreement, any overtime worked has to be paid in cash.
How Many Hours You Can Bank
The FLSA sets hard ceilings on how much comp time you can accumulate, and the ceiling depends on the type of work:
- 480 hours for employees in public safety, emergency response, or seasonal activities. Because those hours are credited at 1.5x, the cap represents no more than 320 actual overtime hours worked.1eCFR. 29 CFR Part 553 Subpart A – Section 7(o) Compensatory Time and Compensatory Time Off
- 240 hours for all other state and local government employees, representing no more than 160 actual overtime hours worked.5U.S. Department of Labor. Fact Sheet 7 – State and Local Governments Under the Fair Labor Standards Act
Once you hit your cap, the employer must pay cash at the time-and-a-half rate for any further overtime. You cannot waive the cap or agree to bank more.
Just as important: FLSA comp time cannot be subject to a “use it or lose it” policy. Your accrued hours stay on the books until you use them, receive a cash payout, or leave the job. An agency that zeroes out a balance through forfeiture is effectively confiscating earned wages.
Using Your Comp Hours
If you request to use accrued comp time, the employer must let you take it within a “reasonable period” after your request, unless doing so would “unduly disrupt” the agency’s operations.6eCFR. 29 CFR 553.25 – Conditions for Use of Compensatory Time The undue disruption standard is deliberately high. A supervisor finding it inconvenient to cover a shift isn’t enough. The agency has to reasonably and in good faith anticipate that your absence would impose an unreasonable burden on its ability to deliver services of acceptable quality and quantity to the public.
The employer can also push the other direction. In Christensen v. Harris County, the Supreme Court held that nothing in the FLSA prevents a public employer from requiring employees to use their accrued comp time. The Court reasoned that the statute is designed to make sure comp time gets liquidated, not to restrict when the employer schedules it.7Cornell Law School. Christensen v. Harris County So if your agency tells you to burn down your balance during a slow period, that is lawful under federal law, though a collective bargaining agreement may restrict it.
Cashing Out Comp Hours
An employer can convert comp time to cash at any point during employment. The FLSA doesn’t prohibit paying out some or all of an accrued balance, either at the employer’s initiative or the employee’s request. Payment during active employment is calculated at your regular rate of pay at the time of the payout.1eCFR. 29 CFR Part 553 Subpart A – Section 7(o) Compensatory Time and Compensatory Time Off
When employment ends, for any reason, the employer must pay out all unused comp time. The payout rate is the higher of:
- Your average regular rate over the last three years of employment, or
- Your final regular rate of pay.2Office of the Law Revision Counsel. 29 USC 207 – Maximum Hours
That “whichever is higher” rule protects employees who banked hours years ago at a lower rate. If you accrued 100 hours when you earned $20 an hour but you leave the job earning $28 an hour, the payout is based on at least $28. The payments are wages, so standard payroll tax withholdings apply.
When the Employer Breaks the Rules
An employer that offers comp time illegally in the private sector, fails to credit the 1.5x rate, or refuses to pay out balances at separation is liable for the full amount of unpaid overtime compensation plus an equal amount in liquidated damages. That doubling is the default under the FLSA, not an exceptional penalty, and a court can reduce liquidated damages only if the employer proves the violation was made in good faith with reasonable grounds for believing it was lawful.3Office of the Law Revision Counsel. 29 U.S. Code 216 – Penalties The employer also pays the employee’s attorney’s fees and court costs.
You have two years from the violation to file a claim, or three years if the violation was willful, meaning the employer knew or showed reckless disregard for whether its conduct broke the FLSA.8Office of the Law Revision Counsel. 29 U.S. Code 255 – Statute of Limitations Claims can be brought individually or on behalf of similarly situated employees, in either federal or state court.
What About Private-Sector Comp Time
Legislation to extend comp time to private-sector workers has been introduced in Congress repeatedly but has never passed. The most recent version, the Working Families Flexibility Act, was reintroduced in March 2025 for the 119th Congress. It would let private employers offer non-exempt employees the choice between comp time and cash overtime, cap accrual at 160 hours per year, and require a cash-out of any unused balance at year’s end. The bill requires the choice to be voluntary, backed by a written agreement, and included in collective bargaining agreements for union-represented workers. As of early 2026, it remains a proposal. Private-sector employers still must pay cash overtime to non-exempt employees.