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 South Dakota, as in other states, the rules regarding compensatory time off in lieu of overtime pay are influenced by the Fair Labor Standards Act (FLSA). For federal, state, or local government employees who occasionally work overtime, they may receive compensatory time off instead of cash overtime pay under certain conditions. This is not typically allowed in the private sector, where it is generally illegal to compensate nonexempt employees with compensatory time instead of overtime pay. Exempt employees, often in executive, professional, and administrative roles, are not usually eligible for overtime pay, but government agencies may still grant them compensatory time off. For nonexempt employees under the FLSA, any accrued compensatory time off must be used within 26 pay periods. If it is not used within this timeframe, the employer may be required to pay the employee for the overtime work at the overtime rate from when the work was performed. It's important to note that while these are the general federal guidelines, specific state laws and regulations can also apply and may vary.