Comp time is allowed in the public sector, but private-sector employers are prohibited from offering future paid time off to nonexempt employees in lieu of complying with the overtime requirements of the Fair Labor Standards Act (FLSA).
That said, "offering paid time off in future workweeks to reward an exempt employee for having gone above and beyond the normal work expectations is not prohibited," stated James Coleman, an attorney with Constangy, Brooks, Smith & Prophete in Fairfax, Va.
Rules of the Road
True compensatory time, in the sense of what's permissible for public-sector employers to pay to nonexempt employees, occurs when overtime hours are worked in one workweek, and instead of paying overtime at the rate of 1.5 times the employee's "regular rate of pay," the employer credits 1.5 hours to a comp time bank for every hour worked over 40. Then the employee is allowed to use their banked comp time hours in future workweeks as a form of paid leave, Coleman explained.
"The FLSA has detailed regulations that govern the use of comp time, including that there be an agreement or understanding upfront, strict pay-out rules, limits on how much comp time can be accrued, and payment upon termination of employment," he said. "The biggest limitation is that private-sector employers may not use comp time" for nonexempt employees.
Each time groups representing private-sector employers have sought amendments to the FLSA to allow for the use of comp time for nonexempt...
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