Labor Code – LAB § 204.3
(a) An employee may receive, in lieu of overtime compensation, compensating time off at a rate of not less than one and one-half hours for each hour of employment for which overtime compensation is required by law. If an hour of employment would otherwise be compensable at a rate of more than one and one-half times the employee’s regular rate of compensation, then the employee may receive compensating time off commensurate with the higher rate.
(b) An employer may provide compensating time off under subdivision (a) if the following four conditions are met:
(1) The compensating time off is provided pursuant to applicable provisions of a collective bargaining agreement, memorandum of understanding, or other written agreement between the employer and the duly authorized representative of the employer’s employees; or, in the case of employees not covered by the aforementioned agreement or memorandum of understanding, pursuant to a written agreement entered into between the employer and employee before the performance of the work.
(2) The employee has not accrued compensating time in excess of the limit prescribed by subdivision (c).
(3) The employee has requested, in writing, compensating time off in lieu of overtime compensation.
(4) The employee is regularly scheduled to work no less than 40 hours in a workweek.
(c)(1) An employee may not accrue more than 240 hours of compensating time off. Any employee who has accrued 240 hours of compensating time off shall, for any additional overtime hours of work, be paid overtime compensation.
(2) If compensation is paid to an employee for accrued compensating time off, the compensation shall be paid at the regular rate earned by the employee at the time the employee receives payment.
(d) An employee who has accrued compensating time off authorized to be provided under subdivision (a) shall, upon termination of employment, be paid for the unused compensating time at a rate of compensation not less than the average regular rate received by the employee during the last three years of the employee’s employment, or the final regular rate received by the employee, whichever is higher.
(e)(1) An employee who has accrued compensating time off authorized to be provided under subdivision (a), and who has requested the use of that compensating time, shall be permitted by the employee’s employer to use the time within a reasonable period after making the request, if the use of the compensating time does not unduly disrupt the operations of the employer.
(2) Upon the request of an employee, the employer shall pay overtime compensation in cash in lieu of compensating time off for any compensating time off that has accrued for at least two pay periods.
(3) For purposes of determining whether a request to use compensating time has been granted within a reasonable period, the following factors shall be relevant:
(A) The normal schedule of work.
(B) Anticipated peak workloads based on past experience.
(C) Emergency requirements for staff and services.
(D) The availability of qualified substitute staff.
(f) Every employer shall keep records that accurately reflect compensating time earned and used.
(g) For purposes of this section, the terms “compensating time” and “compensating time off” mean hours during which an employee is not working, which are not counted as hours worked during the applicable workweek or other work period for purposes of overtime compensation, and for which the employee is compensated at the employee’s regular rate.
(h) This section shall not apply to any employee exempt from the overtime provisions of the California wage orders.
(i) This section shall not apply to any employee who is subject to the following wage orders of the Industrial Welfare Commission: Orders No. 8-80, 13-80, and 14-80 (affecting industries handling products after harvest, industries preparing agricultural products for market on the farm, and agricultural occupations), Order No. 3-80 (affecting the canning, freezing, and preserving industry), Orders No. 5-89 and 10-89 (affecting the public housekeeping and amusement and recreation industries), and Order No. 1-89 (affecting the manufacturing industry).