Under certain conditions, employees of federal, state, or local government agencies who irregularly or occasionally work overtime may receive compensatory time off—which is time off that is compensated—instead of receiving cash overtime pay. It is usually illegal for private sector businesses to compensate employees who are eligible for overtime pay (are nonexempt under the Fair Labor Standards Act) with compensatory time—often referred to as comp time.

Policies on compensatory time off in lieu of overtime pay vary between employees who are covered by the Fair Labor Standards Act (FLSA) and those who are exempt from it (usually executive, professional, and administrative employees). Exempt employees are generally not eligible to receive overtime pay. But whether an employee is exempt or nonexempt under the FLSA, the government employer (agency) may be able to approve comp time for an employee.

Compensatory time off in lieu of overtime pay generally must be used within 26 pay periods. If an FLSA nonexempt employee doesn’t take comp time within 26 pay periods, the employer may have to pay the employee for that overtime work at the overtime rate in effect during the pay period in which the overtime work was performed.

In New Mexico, as in other states, the use of compensatory time off in lieu of overtime pay for government employees is permitted under certain conditions. This practice is in accordance with the Fair Labor Standards Act (FLSA), which allows federal, state, and local government agencies to provide compensatory time off to employees who work overtime instead of cash overtime pay. This is typically not allowed for private sector employees who are nonexempt under the FLSA; these employees must receive cash for overtime hours worked. For exempt employees, who are generally not eligible for overtime pay, government employers may still approve compensatory time off. In both cases, the comp time must usually be used within 26 pay periods, or the employee may be entitled to receive payment for the overtime at the applicable overtime rate. It's important to note that specific state statutes or agency policies may further govern the accrual and use of compensatory time for government employees in New Mexico.