FLSA comp time is a compensation arrangement that lets state and local government employees bank paid time off instead of receiving cash overtime pay, at a rate of one and a half hours of leave for every overtime hour worked. It exists only in the public sector. Private employers cannot use it as a substitute for cash overtime owed to non-exempt workers, and federal government employees operate under a different comp time statute with different rules.
How It Works
When a covered public employee works more than 40 hours in a workweek, the agency can credit the extra time to a leave bank rather than issue an overtime check. Each overtime hour earns 1.5 hours of banked time off, which mirrors the cash overtime premium of time-and-a-half. Work ten overtime hours, bank fifteen hours of paid leave. When you later use those hours, you are absent from work but still collecting your regular paycheck.1Office of the Law Revision Counsel. 29 USC 207 – Maximum Hours
Those banked hours are earned wages, not a discretionary perk. If you leave the job, the agency owes you cash for every unused hour. That legal weight is what separates FLSA comp time from informal “flex time” arrangements a workplace might offer as a courtesy.
Who Can Offer FLSA Comp Time
Only public agencies can. That means state governments, local governments such as cities, counties, school districts, and transit authorities, and interstate governmental agencies. Private-sector employers are prohibited from swapping cash overtime for time off with non-exempt employees. A private company that tries it is simply failing to pay overtime and faces the same consequences as any other overtime violation.1Office of the Law Revision Counsel. 29 USC 207 – Maximum Hours
The Agreement Must Come First
Even an eligible public agency cannot start banking hours on its own. A formal understanding has to exist before the overtime work happens. Where employees are unionized, this is usually a collective bargaining agreement or memorandum of understanding. Where there is no union, the agency and the individual employee must reach a clear agreement in advance.2eCFR. 29 CFR Part 553 – Application of the Fair Labor Standards Act to Employees of State and Local Governments
The agreement does not always have to be a signed written contract. For employees hired before April 15, 1986, who have no union representation, a regular practice of granting comp time that was already in place on that date qualifies. For everyone else, the understanding needs to be established beforehand and should be documented. Without an agreement, the agency has to pay standard cash overtime.1Office of the Law Revision Counsel. 29 USC 207 – Maximum Hours
Voluntariness
An employee’s decision to accept comp time in place of cash has to be genuinely voluntary. The Department of Labor’s regulations say workers cannot be pressured into accepting more banked hours than the agency can realistically let them use within a reasonable timeframe. Piling up hundreds of hours in a leave bank while never letting employees actually take the time off looks less like a compensation choice and more like an unpaid overtime scheme.3eCFR. 29 CFR 553.25 – Conditions for Use of Compensatory Time
Accrual and Caps
The accrual math is fixed by statute: 1.5 hours of comp time for every hour of overtime. The value of the leave equals what the cash overtime paycheck would have been.4eCFR. 29 CFR Part 553 Subpart A – Compensatory Time and Compensatory Time Off
Federal law caps how many hours you can stockpile, and the cap depends on the job:
- 240 hours for most public employees, which represents 160 actual overtime hours worked.
- 480 hours for employees in public safety, emergency response, or seasonal work, such as police officers, firefighters, and peak-season infrastructure maintenance crews. That cap represents 320 actual overtime hours worked.
Once you hit your cap, the agency must go back to paying cash for any additional overtime, at the standard time-and-a-half rate, in the same pay period the extra hours are worked. The full leave bank stays intact until you use some of it.1Office of the Law Revision Counsel. 29 USC 207 – Maximum Hours
Using the Hours You Banked
You have the right to use your accrued comp time, and the employer must honor a request within a “reasonable period” unless granting it would unduly disrupt agency operations. That is a higher bar than plain inconvenience. The agency has to show that your absence would create an unreasonable burden on its ability to deliver acceptable public services during the time you asked off.3eCFR. 29 CFR 553.25 – Conditions for Use of Compensatory Time
What counts as a “reasonable period” is not a fixed number of days. The regulations tie it to the agency’s customary practices and the surrounding circumstances, including anticipated peak workloads, emergency staffing needs, and the availability of qualified substitutes. If a collective bargaining agreement sets specific timelines for granting requests, those terms control.3eCFR. 29 CFR 553.25 – Conditions for Use of Compensatory Time
Can Your Employer Make You Use It?
Yes. The U.S. Supreme Court in Christensen v. Harris County held that nothing in the FLSA or its regulations bars a public employer from compelling employees to draw down their banked hours. An agency worried about a growing comp time liability can order employees to take time off to reduce the balance, even if the employees would rather keep banking.5Legal Information Institute (LII) / Cornell Law School. Christensen v. Harris County
Expiration
Federal law does not set a specific expiration date on accrued comp time. It does allow the agreement between the agency and employees to include provisions on preserving, using, or cashing out banked hours, so long as they are consistent with the statute. Some agencies negotiate “use it or lose it” windows, but any such policy still has to result in the employee being compensated. An agency cannot simply zero out a balance without paying for it.4eCFR. 29 CFR Part 553 Subpart A – Compensatory Time and Compensatory Time Off
Getting Paid Out
When you leave a public agency job for any reason, the employer must pay out all unused comp time in cash. The payout rate is the higher of two figures: your final regular rate of pay, or the average regular rate you earned over the last three years of employment. That “whichever is higher” rule protects employees who received late-career raises and those whose pay fluctuated over time.1Office of the Law Revision Counsel. 29 USC 207 – Maximum Hours
These payouts are not discretionary. They are earned wages, legally indistinguishable from the overtime pay you would have collected in cash at the time of the work. Agencies cannot erase a balance because you resigned, retired, or were fired. If an agency cashes out some of your comp time while you are still employed to reduce its liability, that payment is calculated at your regular rate at the time of the payout.1Office of the Law Revision Counsel. 29 USC 207 – Maximum Hours
Private-Sector Workers and Exempt Employees
The ban on comp time in the private sector applies specifically to non-exempt employees: hourly workers and salaried employees paid below the federal overtime salary threshold. As of 2026 that threshold is $684 per week, or $35,568 per year, after a federal court vacated the Department of Labor’s planned increase. Anyone below that amount who is not otherwise exempt must be paid cash overtime.6U.S. Department of Labor. Earnings Thresholds for the Executive, Administrative, and Professional Exemptions
Exempt employees are a different situation. Because the FLSA’s overtime provisions do not reach them, a private employer can informally give an exempt salaried worker time off after a heavy week without violating federal law. That kind of flexibility sits entirely outside the FLSA comp time framework, meaning none of the accrual rates, caps, or payout rules apply. It is a workplace practice, not a statutory right.7U.S. Department of Labor. Flexible Schedules
Federal Employees Are on a Different System
If you work for the federal government, the FLSA comp time rules described above generally do not apply to you. Federal comp time comes from a separate statute in Title 5 of the U.S. Code and accrues at an hour-for-hour rate rather than time-and-a-half. Federal employees paid above the GS-10 maximum rate may even be required to take comp time instead of cash overtime for irregular or occasional overtime work.8Office of the Law Revision Counsel. 5 USC 5543 – Compensatory Time Off
What Happens When the Rules Are Broken
A private employer caught substituting comp time for cash overtime owes the affected workers all unpaid overtime plus an equal amount in liquidated damages, which effectively doubles the bill. An employee owed $5,000 in overtime illegally converted to comp time could recover $10,000.9Office of the Law Revision Counsel. 29 USC 216 – Penalties
On top of that, the Department of Labor can impose civil penalties of up to $2,515 per violation when the conduct is willful or repeated, and workers can recover reasonable attorney’s fees. Class-wide claims covering every non-exempt employee under an illegal policy multiply the exposure quickly.10U.S. Department of Labor. Civil Money Penalty Inflation Adjustments
Public agencies face similar consequences when they mishandle comp time. Failing to pay out balances at termination, denying valid leave requests without meeting the “unduly disruptive” standard, and pressuring employees into accepting hours they will never get to use can all trigger enforcement actions and back-pay liability.