California law allows a nonexempt employee to receive, in lieu of overtime pay, compensatory time off – “comp time” – at a rate of at least: (1) one-and-half hours for each hour the law requires one-and-a-half times his regular rate of pay; and (2) two hours for each hour the law requires double time.1 Many employees who don’t get vacation, PTO, or floating holidays readily agree to comp time. Unfortunately, many employers think they can thwart their employees from using comp time, effectively making them work overtime for free. For that reason, California law makes an employer leap through fiery hoops before he can offer comp time in lieu of overtime wages. Here’s the complete guide to comp time.
Accruing Comp Time
How much comp time an employee accrues depends on which overtime rate applies. California law requires an employer to pay a nonexempt employee: (1) one-and-a-half times his regular rate if he works more than eight hours in one workday or more than 40 hours in one workday; and (2) twice his regular rate if he works more than 12 hours in one workday or more than eight hours on the seventh day of a workweek.2 Thus, an employee who regularly works an eight-hour shift at $20 per hour would earn $30 per hour for the ninth, tenth, and eleventh hours of work. If, however, he earns comp time instead of overtime, he will accrue four-and-a-half hours of comp time and no overtime pay.
Employers have a strong incentive to tempt employees into authorizing comp time in lieu of overtime. Thus, California law requires an employer to overcome four hurdles before he can provide comp time: (1) a written agreement between the employer and employee must authorize comp time before the employee begins work; (2) the employee must not have accrued more than 240 hours of comp time; (3) the employee must submit a written request to use comp time in lieu of receiving overtime pay; and (4) the employee must be regularly scheduled to work at least 40 hours in a workweek.3 In other words, an employer must still pay an employee overtime if he accrues more than 240 hours of comp time.4
Using and Cashing Out Comp Time
Even if an employer crosses every “t” and dots every “i”, he can’t tempt employees into accepting comp time, only to thwart them from using it. Thus, an employer must grant an employee’s request to use any accrued comp time within a reasonable period after the employee makes the request, as long as the employee’s use of comp time wouldn’t “unduly disrupt” the employer’s operations.5 The reasonableness of any delay in granting an employee’s request depends on several factors: (1) the normal schedule of work; (2) anticipated peak workloads based on past experience; (3) emergency requirements for staff and services; and (4) the availability of qualified substitute staff.6
Even if an employee agrees in writing to take comp time in lieu of receiving overtime pay, he may demand cash overtime wages in lieu of comp time if he has accrued comp time for two or more pay periods.7 Similarly, all accrued but unused comp time is due and payable immediately upon termination or within 72 hours of resignation (unless the employee gives at least 72 hours’ notice of his resignation, in which case his employer must pay him immediately upon resignation).8 The unused comp time is payable at the higher of two pay rates: (1) the average regular rate that the employee received during the last three years of his employment; or (2) the final regular rate he received.9