“Compensatory time off ” and “makeup time” are concepts often invoked as convenient methods to address the needs of both the employer and the employee. Indeed, numerous California employers permit compensatory time off and makeup time informally, without having any real understanding of the rules that apply. So what do these terms really mean, and what are employers and employees required to do in order to take advantage of these concepts?

In a nutshell, compensatory time off is time off taken in lieu of overtime pay. California’s rules on compensatory time off are set forth in Labor Code section 204.3. The compensating time off must be at the same rate as the overtime rate that is required by law, which will be one and one-half hours per hour of work or more. There must be a written agreement between the employer and the employee, or the duly authorized representative of the employees, providing for compensatory time off before the work is performed. The employee must request the use of compensatory time off in lieu of overtime compensation in writing. The employee must be regularly scheduled to work no less than 40 hours in a workweek, and the employee cannot accrue more than 240 hours of compensating time.

Upon discharge from employment, any unused compensating time must be paid at the employee’s final regular rate of pay, or the average of the employee’s regular rate over the last three years, whichever is higher.