A1.   FLSA-exempt employees earn compensatory time off in lieu of title 5 overtime pay under 5 U.S.C. 5542 and 5 CFR 550.113, and are subject to OPM's compensatory time off regulations at 5 CFR 550.114. FLSA-nonexempt employees earn compensatory time off in lieu of overtime pay under section 7 of the FLSA (29 U.S.C. 207) and 5 CFR 551.501, and are subject to OPM's compensatory time off regulations at 5 CFR 551.531. Both 5 CFR 550.114 and 5 CFR 551.531 are derived from the statutory authority governing compensatory time off in 5 U.S.C. 5543 and, for employees under flexible work schedules, 5 U.S.C. 6123(a)(1). An employee's unused compensatory time off is subject to the regulations under which it was earned, regardless of the employee's current FLSA exemption status.

A2.   Agencies must provide payment for, or require forfeiture of, compensatory time off under the conditions set forth in 5 CFR 550.114(d)-(f) and 5 CFR 551.531(d)-(f), as applicable. The general rule is that accrued compensatory time off must be liquidated (i.e., paid) or forfeited (as applicable under agency policies) if not used by the end of the 26th pay period after the pay period during which it was earned. Exceptions to the general rule relate to the following circumstances: (1) the 3-year grandfathering period for any compensatory time off to an employee's credit as of May 14, 2007, which must be used by the end of the pay period ending 3 years after May 14, 2007; (2) transfer to another agency; (3) separation from Federal service; and (4) separation or placement in a leave without pay status in connection with service in the uniformed services or entitlement to workers' compensation based on an on-the-job injury. (When exception #4 applies, the employee must be paid for the unused compensatory time off; forfeiture is not an option.)

A3.   For the purposes of the compensatory time off regulations, the term "agency" is defined under 5 CFR 550.103 to mean a department (as defined in this section) and a legislative or judicial branch agency which has positions subject to subchapter V (Premium Pay) of chapter 55 of title 5, U.S. Code. The term "department" is defined under 5 CFR 550.103 to mean an executive agency and a military department. (See 5 U.S.C. 101-105 and 5541(1).) Since the military departments (Army, Navy, and Air Force) have standing as separate agencies, the rest of the Department of Defense as a group is treated as a separate agency.

A4.   Yes. Agencies are required to provide payment for accrued compensatory time off under the conditions set forth in 5 CFR 550.114 and 5 CFR 551.531. However, an agency has discretionary authority to provide payment for accrued compensatory time off in other circumstances. This discretionary authority should be exercised by issuing formal policies so that employees are treated consistently.

Additional situations in which an agency may choose to provide for payment of compensatory time off include, but are not limited to, the following:

A5.   An agency may require an employee to forfeit legitimately earned compensatory time off only under the circumstances identified in OPM regulations. An agency may not establish a policy requiring an employee to forfeit unused compensatory time off earned under 5 CFR 550.114 in lieu of title 5 overtime pay in circumstances not identified in that section. An agency may not require an employee to forfeit compensatory time off earned under 5 CFR 551.531 in lieu of FLSA overtime pay under any circumstances.