[Code of Federal Regulations]
[Title 29, Volume 3]
[Revised as of July 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 29CFR553.26]

[Page 285]
 
                             TITLE 29--LABOR
 
         CHAPTER V--WAGE AND HOUR DIVISION, DEPARTMENT OF LABOR
 
PART 553_APPLICATION OF THE FAIR LABOR STANDARDS ACT TO EMPLOYEES OF 
STATE AND LOCAL GOVERNMENTS--Table of Contents
 
                            Subpart A_General
 
Sec. 553.26  Cash overtime payments.

    (a) Overtime compensation due under section 7 may be paid in cash at 
the employer's option, in lieu of providing compensatory time off under 
section 7(o) of the Act in any workweek or work period. The FLSA does 
not prohibit an employer from freely substituting cash, in whole or 
part, for compensatory time off; and overtime payment in cash would not 
affect subsequent granting of compensatory time off in future workweeks 
or work periods. (See Sec. 553.23(a)(2).)
    (b) The principles for computing cash overtime pay are contained in 
29 CFR part 778. Cash overtime compensation must be paid at a rate not 
less than one and one-half times the regular rate at which the employee 
is actually paid. (See 29 CFR 778.107.)
    (c) In a workweek or work period during which an employee works 
hours which are overtime hours under FLSA and for which cash overtime 
payment will be made, and the employee also takes compensatory time off, 
the payment for such time off may be excluded from the regular rate of 
pay under section 7(e)(2) of the Act. Section 7(e)(2) provides that the 
regular rate shall not be deemed to include

    . . . payments made for occasional periods when no work is performed 
due to vacation, holiday, . . . or other similar cause.


As explained in 29 CFR 778.218(d), the term ``other similar cause'' 
refers to payments made for periods of absence due to factors like 
holidays, vacations, illness, and so forth. Payments made to an employee 
for periods of absence due to the use of accrued compensatory time are 
considered to be the type of payments in this ``other similar cause'' 
category.

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