Small Business Glossary and Definitions

A Compensatory Time-Off Plan is time off work instead of overtime for occasional, irregular or scheduled overtime work. It generally consists of one hour off for every one hour of overtime worked. Federal courts have ruled that if the employee works a set schedule for a set salary, the employer can schedule that person for unpaid days off the following week to offset the overtime hours. The time off can’t accumulate from one week to the next to create a “bank” of unpaid leave time. Also, if the employee is terminated or quits before taking the compensatory time off, then the overtime must be paid. The plan is designed to allow the employer to have control over the employee’s wages by limiting the number of hours worked.