A private employer in California is not permitted to offer compensatory time off (CTO) to nonexempt employees in lieu of paying overtime, unless the employer is one of the rare few exempt from the federal Fair Labor Standards Act (FLSA).1 If you are covered by the FLSA, you are prohibited from offering employees CTO in lieu of overtime. For more information on FLSA coverage, see “Who Is Covered By the FLSA?” in Fair Labor Standards Act (FLSA).

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