Beginner’s Guide to California Overtime Law

In terms of overtime laws, California is truly the golden state. Our wage and hour laws exceed Federal laws, and are stronger than most other states’. But why are overtime laws necessary?

Overtime Laws: We Need Them

Two Purposes for Overtime Laws

We pay higher wages for overtime for two reasons:

  1. To compensate employees for extra time they spend on the job.

  2. To encourage employers to hire more workers instead of asking their existing staff to cover for the extra workhour needs.

Both federal and state laws address the need for overtime regulations. Because there are multiple layers of applicable law, employers in California must comply with both.

Federal Overtime Law: FLSA

The governing federal law concerning employees working overtime is the Fair Labor Standards Act of 1937 (FLSA).

According to the U.S. Department of Labor FLSA reference guide, the FLSA establishes:

…minimum wage, overtime pay, recordkeeping, and child labor standards affecting full-time and part-time workers in the private sector and in Federal, State, and local governments.

The FLSA mandates:

  • A standard work week of 40 hours

  • Overtime pay of one and one-half times the regular rate for any time worked above 40 hours.

Note: Work on holidays or weekends are not considered overtime by FLSA unless they are over and above the normal 40 hour workweek.

There are FLSA exemptions for employees with certain job duties. The exemption categories include executives, professionals, and outside salespersons. For more details, see the section of the Department of Labor’s guide concerning exemptions.

California Overtime Law: General Concepts

How Does Overtime Work in California?

California Labor Law is among the toughest in the country. Federal overtime law sets a standard, but our state law goes beyond that, and demands more of employers.

These laws strongly impact our California workers – over 18 million employees as of April 2018.

There are two sources of overtime Law in California:

The DLSE is the state agency authorized to enforce California’s wage and hour laws, including IWC Wage orders.

Note: The California IWC is no longer in operation. But standing IWC Wage Orders continue to exist and are upheld by the DLSE.

Since it generally exceeds federal law, we will be discussing California’s overtime law for the remainder of this article.

Liberal Interpretation in Favor of Employees

Because overtime laws protect millions of workers in California, our courts interpret them generously. The California Supreme Court has explained it this way:

…in light of the remedial nature of the legislative enactments authorizing the regulation of wages, hours and working conditions for the protection and benefit of employees, the statutory provisions are to be liberally construed with an eye to promoting such protection.

Definition of Overtime

Overtime generally means “working time in excess of a standard day or week ”.

The California Labor Code uses the rules described below to set the thresholds beyond which overtime begins.

How is Overtime Pay in California Calculated?

According to California’s Department of Industrial Relations, the following overtime pay rates apply for all eligible employees:

One and one-half times the regular rate of pay:

  • After 8 hours and up through 12 hours (in a workday).

  • The first 8 hours worked on the seventh consecutive workday (in a workweek).

Double the regular rate of pay:

  • After 12 hours in any workday.

  • After 8 hours on the seventh consecutive workday (in a work week).

Eligibility: Who Qualifies for California Overtime?

Employees 18 years of age or older are eligible for overtime pay in California, as well as 16 and 17 year-olds who aren’t required by law to attend school and aren’t otherwise legally prohibited from engaging in the work.

California overtime law does not apply to employees younger than 16 years of age.

Most employees are Entitled to Protection

In California, most employees are entitled to the protection of our overtime laws, including many salaried employees. However, there are exemptions and exceptions. According to the State of California Department of Industrial Relations:

  • Exemptions: An “exemption” means that the overtime law does not apply to a particular classification of employees.

  • Exceptions: An “exception” refers to a certain classification of employees who are paid for overtime, but have different overtime pay rules..

Exempt Employees

The nature of the job is what determines whether or not an employee is exempt. Some examples of workers that are exempt from the State overtime laws are:

  • Executive, professional, or administrative workers

  • Outside salespersons

  • Certain unionized employees

  • Taxicab drivers

For more information on exemptions to California overtime law, see the Department of Industrial Relations overtime exemption page.

Exceptions

Some examples of exceptions to California overtime law are:

  • Employees with validly adopted alternative workweek schedule

  • Some employees in the healthcare industry

  • Camp Counselors

  • Live-in employees

More on exceptions to California overtime law.

How Does Overtime Work for Salaried Employees?

Many people believe that salaried employees are not eligible for overtime. While it’s true that some salaried employees are in the exempt category (executives, professionals, etc.), many are not.

California law states that salaried employees must be paid overtime unless they meet the rules for being exempt, or an exception applies to them.

What to Do if There’s a Violation?

If an employee believes that his or her wage and hour rights have been violated, there are three ways to address the issue. An employee can:

  • Resolve the issue with the employer.

  • File a wage claim with the Division of Labor Standards Enforcement (also called DLSE)

  • File a lawsuit against the employer in court.

If the worker longer has a job with the employer, he or she can make a claim for the waiting time penalty according to Labor Code Section 203.

Employers and employees have the right to use an attorney to help them deal with overtime law violations, and the outcome is often better for those who are represented by a competent labor law attorney.

Federal law and California law are different in terms of the maximum penalties allowed in various situations, so the choice of bringing a claim in Federal vs state court will depend upon the circumstances of the case.

At xxx Law firm, we represent both employees and employers in California overtime law cases. We’ll be glad to talk with you about the best path to resolving your issues.

Increasing Litigation Over Wages and Hours

As noted above, if California employees have a wage and hour issue that can’t be resolved by talking to their employer, they can either file a wage claim with DLSE, or go into litigation in federal or state courts.

It seems that many employees are choosing the option to “take it to the courts”, because litigation concerning wages and hours is on the increase.

Wage Theft Happens Frequently

The Washington Post article mentioned above states that there is massive wage theft in America.

What is Wage Theft?

According to the UCLA Labor Center,

Wage theft is the illegal practice of not paying workers for all of their work including; violating minimum wage laws, not paying overtime, forcing workers to work off the clock, and much more.

Wage theft can happen through a failure to pay employees for working overtime, and other unscrupulous practices, including:

  • Not paying restaurant workers for “prep work”

  • Forcing workers to “clock out” when business is slow.

  • Demanding that workers clean up after their shift is over – without pay.

Lack of Enforcement Encourages Wage Theft

The UCLA Labor Center says that even though California has strict laws concerning wages and hours, wage theft is still prevalent because of lack of enforcement. According to the Labor Center:

In the current system it is easy for unscrupulous employers to avoid the consequences of their actions. In fact, employers often close up shop or open up their business under another name to avoid paying their workers.

Recent Examples of California Wage and Hour Litigation

Cheesecake Factory

In a June 2018 case, 559 California janitors were awarded $4.5 million in lost wages and fines. The Cheesecake factory and its janitorial subcontractor, were told by the California Labor Commission that they must pay up for illegal practices – including ignoring overtime rules, forcing janitors to work extra time without pay, and not allowing proper meal and rest breaks.

Seven Restaurants

In another 2018 case, the California State Labor Commissioner awarded workers at seven California restaurants wage violation payments totaling more than $10 Imillion.

The Labor Commission found that many workers were paid a fixed salary that didn’t account for overtime, even though they often worked 55+ hours per week.

Why So Much Litigation?

Employer Greed

In many cases, business owners are literally stealing earnings from their employees. Wage theft is a crime that’s under-reported and victimizes millions of Americans – especially immigrant and low-income workers. Far too often, employers consider the chance for extra profit worth the risk of exposure and penalties.

Employer Error

We know that many workers don’t know California Labor Law. But there are also employers who don’t fully understand the law.

California wage and hour law is multi-layered, and can change from year to year. To keep up with it takes a concerted effort; employers need to make sure their payroll procedures and/or software are continuously updated.

For instance, there are now some local ordinances concerning wages and hours in addition to the Federal and State laws. In 2016, the City of Berkely passed a wage theft ordinance to protect its construction workers (who have the second-highest rate of wage violations, after

Wage Litigation Has Increased as Union-Related Litigation Has Decreased

It’s likely that issues previously resolved via contract negotiations are now being resolved in the courts.

In the Washington Post article mentioned above, Samuel Estreicher, director of the Center for Labor and Employment Law at New York University Law School, explains that, “As unions have declined, lawyers are suing less under the laws that govern labor-management relations and more over wages and hours.”

It’s All in the Details

As author Fredrik Backman, says, Everything is complicated if no one explains it to you.”

California wage and hour laws are like that; they can seem overwhelmingly complicated at first glace.

Since they have to cover so many different types of work situations, they are indeed a bit complex. But if you keep the goal in mind (protecting numerous types of employees), once the laws are explained, it all makes sense.

In this section, we’ll make things simpler by explaining the basic ideas and rules behind California overtime law.


As shown in the text belo
w from the California Department of Industrial Relations, our overtime laws are based on the definition of “regular rate of pay”, “workday”, and “workweek”.

In California, the general overtime provisions are that a nonexempt employee 18 years of age or older, or any minor employee 16 or 17 years of age who is not required by law to attend school and is not otherwise prohibited by law from engaging in the subject work, shall not be employed more than eight hours in any workday or more than 40 hours in any workweek unless he or she receives one and one-half times his or her regular rate of pay for all hours worked over eight hours in any workday and over 40 hours in the workweek.

California Department of Industrial Relations-Overtime FAQ

We’ll start with a definition of these terms.

Definitions of “Workday”, “Workweek” and “Regular Rate of Pay”

The Department of Industrial Relations provides these definitions:

Workday

A workday is a consecutive 24-hour period beginning at the same time each calendar day, as determined by the employer. A workday stays constant once its defined, and daily overtime is due based on the hours worked in any give workday….Daily overtime is due based on the hours worked in any given workday.

Workweek

Any seven consecutive days, starting with the same calendar day each week beginning at any hour on any day, so long as it is fixed and regularly occurring.

Workweek is a fixed and regularly recurring period of 168 hours, seven consecutive 24-hour periods.

Regular Rate of Pay

The regular rate of pay is the compensation an employee normally earns for the work they perform. The regular rate of pay includes a number of different kinds of remuneration, such as hourly earnings, salary, piecework earnings, and commissions. In no case may the regular rate of pay be less than the applicable minimum wage.

How “Regular Rate of Pay” is Calculated

Hourly

If an employee is paid by the hour, then it’s simple: his or her regular rate of pay is equal to the hourly rate.

Salaried

How is the regular rate of pay calculated for salaried employees?

Take your monthly salary, and:

  1. Multiply it by 12 to get your annual salary.

  2. Divide this number by 52 to get your weekly salary.

  3. Divide this number by the legal maximum regular workweek hours (40) to get your regular rate of pay”per hour.

Piece Work or Commission

The State of California Department of Industrial Relations (DIR) has two ways to calculate regular rate of pay if you are paid by the piece or commission. Either method can be used.

The first method is to simply use the piece or commission rate as the regular rate of pay.

The DIR explains the second method this way:

If you are paid by the piece or commission, either of the following methods may be used to determine the regular rate of pay for purposes of computing overtime:

    • The piece or commission rate is used as the regular rate and you are paid one and one-half this rate for production during the first four overtime hours in a workday, and double time for all hours worked beyond 12 in a workday; or

    • Divide your total earnings for the workweek, including earnings during overtime hours, by the total hours worked during the workweek, including the overtime hours. For each overtime hour worked you are entitled to an additional one-half the regular rate for hours requiring time and one-half, and to the full rate for hours requiring double time.

Employees with Multiple Pay Rates

If an employee has two or more rates, a “weighted average” is used. This is calculated by adding up all the workhours in a week (whether they exceed 40 hours or not) and dividing that by the total earnings for the workweek.

The DIR gives the following example:

 If you work 32 hours at $11.00 an hour and 10 hours during the same workweek at $9.00 an hour, your weighted average (and thus the regular rate for that workweek) is $10.52. This is calculated by adding your $442 straight time pay for the workweek [(32hours x $11.00/hour) + (10 hours x $9.00/hour) = $442] and dividing it by the 42 hours you worked.

Note: California’s Wage Theft Protection Act of 2011 mandates that employers to put all pay rates on the required Notice to Employees.

What Is Excluded When Calculating The Pay Rate?

Some types of payments are excluded in the calculation of the regular rate of pay. Examples are:

  • Vacation and Sick Days (only hours worked qualify)

  • Expense Reimbursements

  • Commute time (However, after arriving at work, if an employee is required to travel for the job, then that travel time is included)

See the DIR’s Overtime FAQ page for more details.

What About Bonuses?

Are bonuses included in the regular rate of pay? It depends on the type of bonus.

If a bonus is non-discretionary i.e., the bonus must to be paid based on certain criteria set forth in a contract or agreement, then it is not included.

However discretionary bonuses (such as extra pay for holidays or as a reward for good service), are included.

“On Call” Hours

Many employees are asked to be available (or “on call”) in case they are needed. Should this be included as workhours? This is another case where the answer is “It depends”.

  • If the employee must stay at the workplace while on call, then it counts as work time.

  • If the employee doesn’t have to remain at the workplace, it depends on the situation.

In California, “hours worked” includes any time that the worker is subject to the “control of the employer”. The determining factor is how many restrictions are placed on the worker when he or she is on call. See DLSE Letter No. 1993.03.31

If workers simply has to to be available by phone, and can otherwise go about their life as usual, their “on call” time is not included in “hours worked”.

Receiving Comp Time Instead of Overtime Wages

Comp time (compensatory time) is “time off” received by an employee who has worked extra hours. Comp time is given instead of overtime pay

An employer can provide comp time in lieu of overtime in California if specific requirements are met.

The most important requirement is that comp time must be equivalent to the overtime pay that was earned. In other words:

  • If the worker was eligible for overtime at a rate of one and one-half times the regular rate of pay, then he or she receives one and one-half hours of comp time for each extra hour worked.

  • If the worker was eligible for overtime at a rate of two times the regular rate of pay, then he or she receives two hours of comp time for each extra hour worked.

The remaining requirements for comp time include:

  • A written comp time agreement must be agreed upon before the overtime work begins.

  • The employee must have requested comp time in writing.

  • The regular work week of the employee must be no less than 40 hours per week.

  • Employees cannot accrue (accumulate or “save up”) comp time beyond 240 hours.

  • If employees have accrued comp time, and their regular rate of pay has changed, then their comp time must reflect the rate of pay effective at the time of payment.

  • If employees with accrued comp time are terminated, they must be paid for the accrued time. The rate must be no less than the average regular rate received by the worker during their last three years of employment, or the final regular rate, whichever is higher.

  • An employee with comp time must be allowed to use it within a reasonable time period.

  • The employer must keep accurate records of comp time accrued and used.

Unauthorized Overtime: The Rules

What if an employee works overtime without permission? California law requires that the employer pay the overtime. If a worker violates the company policy by working overtime, the employee can discipline him or her. But as long as the employer “knew or should have known” about the overtime, he must pay the overtime, whether its authorized or not.

Of course, if the worker deliberately prevents the employer from knowing about the unauthorized overtime, his or her claim is invalid.

Required Overtime

Can an employer make overtime a requirement?

Yes, an employer can require overtime. In most cases, an employer can also discipline an employee for refusing scheduled overtime, up to and including termination.

Overtime Pay Schedule

When should employees be paid for working overtime?

California law says that overtime payments may be delayed a bit.

They can be paid as late as “the payday for the next regular payroll period after which the overtime wages were earned”. In other words, if you work overtime during the week, and are paid at the end of the week, your employer may wait until the end of the next week to pay you for the overtime.

Summing Up: Knowledge is Power

When it comes to overtime law, knowledge is power, and ignorance is not an excuse.

Ignorance of the law or unawareness cannot be pleaded to escape liability.

Henrietta Newton Martin

As the quote above implies, it’s the responsibility of both workers and employers to know the law, including the laws governing overtime. If you are ignorant of the do’s and don’ts, then you lack the power to protect yourself.

Employers

When employers arm themselves with knowledge of federal and state overtime law, they find it’s worth the investment in time, and helps both them and their workers.

Employees

When they understand overtime law, employees have the ability to recognize when they are being taken advantage of by unfair practices, and to take steps to receive all the pay that is due to them.

The information in this article is designed to help you understand your rights and responsibilities concerning overtime law in California.

If you need additional help, please give us a call.