“Comp Time” in California – What is it and how does it work?

Compensatory time off (comp time) is when you receive paid time off (PTO) rather than wages for hours worked beyond your scheduled hours.

In California, non-exempt employees of public agencies (such as city or county governments) and a very small number of private industries can receive comp time instead of overtime pay if four conditions are met:

1. comp time is authorized by a collective bargaining agreement or written agreement before the work is performed,
2. you have not accumulated comp time in excess of 240 hours (or 480 hours for safety personnel),
3. you have requested comp time in writing instead of overtime pay, and
4. you are regularly scheduled to work at least 40 hours in a work week.¹

However, federal law generally forbids traditional comp time arrangements for private sector employees. Private employers generally can only offer ‘comp time’ if it is structured strictly as a Make-Up Time request (same workweek) or a Time-Off Plan (same pay period), discussed below.

Since many employers are simply ignorant of comp time rules, you should consult with a California employment law attorney yourself to make sure your comp time arrangement does not run afoul of the law.  Keep reading to learn more about how comp time works in California.

Cap on Comp Time

California’s cap on comp time for all employees is 240 hours. However, for public safety, emergency response, and seasonal activity personnel (such as police and firefighters), the cap is 480 hours. If you reach your specific cap, you must be paid cash overtime wages for any subsequent overtime work performed.²

Value of Comp Time

In California, one overtime hour worked equals 1.5 hours in paid time off (PTO). If the overtime hour was entitled to a higher rate, such as double time, then one overtime hour equals two hours of PTO.

You can ask to use your accrued comp time within a “reasonable time” following your request.

You can generally cash out your comp time that has accrued over two or more pay periods, but at your regular rate of pay. At termination, you are entitled to financial compensation for your comp time at the higher of:

• your average regular rate of pay for the last 3 years or
• your final regular rate of pay.

This is called the “higher rate” payout rule, and it ensures that employees who have received raises do not lose value on the time they ‘banked’ years prior.³

Benefits of Comp Time

Comp time is a wage-replacement option for working extra hours during the workweek. Rather than a wage, you would receive paid time off (PTO) to use in later work weeks. It is often used to replace overtime pay.

For example: Claire is a town clerk. She usually works 40 hours per week. On Monday, a coworker calls out sick and Claire’s boss asks her to work 2 extra hours. In exchange for the extra work on Monday, Claire receives PTO rather than wages.

Employers frequently use comp time to:

• fill unforeseen staffing gaps,
• create a flexible work schedule, or
• meet an increased demand for services.

Employees may prefer comp time to working overtime at a higher hourly rate in order to get a better work-life balance.

Comp Time for Exempt Employees

Employers often offer ‘informal’ comp time to salaried exempt employees as a reward for working long hours. While giving extra time off is lawful, employers must be careful not to treat this ‘comp time bank’ like an hourly ledger.

If an employer deducts from a salaried employee’s pay because they worked fewer than eight hours in a day, it may jeopardize the employee’s ‘exempt’ status. Courts may view this accounting as evidence that the employee is actually an hourly worker, potentially entitling them to years of back-owed overtime pay.⁴

California vs. Federal Law

The federal Fair Labor Standards Act (FLSA) forbids comp time for non-exempt employees of private employers.

Regulations promulgated by the U.S. Department of Labor (DOL) state that comp time can be paid to full-time exempt employees at private employers in the form of “additional compensation.” That additional compensation can be based on hours worked beyond the normal workweek and paid out as:

• a flat sum payment,
• a bonus payment,
• straight-time hourly wage,
• time-and-a-half pay for overtime hours, or
• paid time off (PTO).

Meanwhile, the FLSA allows public employers to pay their full-time workers with comp time at a rate of no less than 1.5 hours of PTO for each hour worked under certain conditions.

California Labor Code 204.3 technically allows private employers to offer comp time if strict conditions are met (like a written agreement and a 240-hour cap). Though because federal law sets the “floor” for worker protection, the federal ban overrides California’s permission. Since the FLSA offers more protection (guaranteed cash) than the state law (delayed time off), the federal rule wins.⁵

The “Time-Off Plan” Exception

While traditional comp time is unlawful for private employers, there is a narrow exception known as a ‘Time-Off Plan.’ Under this arrangement, a private employer may grant an employee time off in lieu of overtime pay, but only if the time off is taken within the same pay period (such as the same bi-weekly cycle) as the overtime work.

Crucially, the time off must be granted at the overtime rate: The employee must receive 1.5 hours of time off for every one hour of overtime worked. If the time off is not taken by the end of that pay period, the employer must pay the overtime wages in the next paycheck.⁶

Comp Time vs. Make-Up Time

Comp time is working extra hours one workweek in exchange for paid time off (PTO) in a later workweek or pay period. Make-up time is working extra hours on a day to cover an absence earlier in the week.

Because make-up time merely shifts around working hours in the same week, overtime rules are not implied. Make-up hours are paid at your regular rate of pay.

In California, make-up time is allowed if the following three things are true:

1. Your employer approves your written request before you perform the work;
2. You do your make-up time on the same week where you missed your time;
3. You get overtime pay if you end up working more than 11 hours in a workday or more than 40 hours in a workweek.

Note that you can request make-up time for recurring obligations up to four weeks in advance.⁷

Alternative Workweek Schedules

Employers looking for flexibility without overtime costs may also consider an alternative workweek schedule (AWS). Unlike individual ‘make-up time’ requests, an AWS allows an entire work unit to work longer shifts (such as four 10-hour days) without triggering daily overtime pay.

However, implementing an AWS is a rigorous legal process: It requires a secret ballot election where at least two-thirds of the affected employees vote to approve the new schedule. Without this specific vote and subsequent state filing, the 10-hour days remain subject to daily overtime rules.⁸

Frequently Asked Questions

Is comp time legal for private employees in California?

Generally, no. Federal law prohibits private employers from offering traditional comp time (banking overtime hours for future use) to non-exempt employees. However, limited exceptions exist for “Time-Off Plans” if the time is taken within the same pay period.

What is the difference between comp time and make-up time?

Comp time allows you to “bank” overtime hours to use weeks or months later. Make-up time allows you to work extra hours and take time off within the same workweek to avoid losing pay for a personal appointment. Make-up time is legal for private employees; comp time is usually not.

Do I get paid for unused comp time when I leave my job?

Yes. If you are an eligible employee in California (typically in the public sector) with accrued comp time, your employer must cash it out upon termination. It is paid at either your final regular rate or your average rate over the last three years—whichever is higher.

Can salaried exempt employees get comp time?

Yes, but informally. California employers can grant “bonus” time off to salaried employees who work long hours. However, employers cannot treat this like an hourly bank; deducting from a salaried employee’s paycheck for partial-day absences can jeopardize their exempt status.

What is the maximum amount of comp time I can accrue?

For most eligible employees in California, the cap is 240 hours. For public safety personnel, emergency response workers, and seasonal activity employees, the cap is 480 hours. Once you hit the cap, all future overtime must be paid in cash.

Additional Resources

For more information, refer to the following:

• Keeping Track of Comp Time is a Full-Time Job – Labor Law Journal.
• Work Hours, Wages, and Vacation Leave – ILR Review.
• Exemptions from the overtime laws – Official website of the California Department of Industrial Relations (DIR).
• What is an Exempt Employee in California? – Simple explanation by a popular hiring firm.
• How to file a wage claim – Instructions provided by the California Labor Commissioner.

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Legal References