When Is Overtime Comp Time Legal?

When comp time is legal (and when it isn't)

For private employers, non-exempt overtime almost always has to be paid in cash at time-and-a-half. You cannot bank Saturday's extra hours as a free Tuesday later and call it even. If you're a private company with hourly (or salaried non-exempt) staff, treat "comp time instead of overtime" as off-limits.

If you are a state or local government employer, federal law has a narrow path: public agencies may grant compensatory time under strict rules — at least 1.5 hours off per overtime hour, an agreement before the work, and accrual caps. If you are a private employer (including most nonprofits and contractors), that public-agency path does not apply to you.

Two traps catch private owners: flexing hours across weeks ("50 this week, 30 next") still leaves overtime unpaid on the long week, and calling someone "salaried" does not make banked days legal if they were never truly exempt.

What to do this week

• List every "comp time," "banked OT," or "take a day later" deal managers make.
• Pay cash overtime for any private non-exempt week already over 40 hours.
• Flex schedules only inside the same workweek if you want to avoid overtime.
• Separate true exempt employees from everyone else before banking any hours.
• Drop handbook language that promises private-sector comp time in lieu of OT pay.

Where private "comp time" becomes unpaid overtime

• Working a crew 50 hours, then "paying back" hours next week with no OT on the stub.
• Letting staff "choose time off instead of overtime" after a busy weekend.
• Treating government-contract work as if city §7(o) rules cover your private payroll.
• Calling coordinators "salaried" and banking their extra hours as future days off.

Pay the overtime when the hours happen

Private-sector non-exempt overtime is a cash bill, not a favor you repay later. Flex inside the workweek if you need to control hours. Save real compensatory-time programs for public employers that actually qualify — and pay overtime the week it is earned for everyone else.