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Navigating Overtime Requirements for Employers in California

Posted by Grace H. Gil, Esq. | Sep 26, 2023

In the vibrant state of California, employers must be well-versed in the intricacies of overtime requirements to ensure compliance with the law. This blog post explains the key aspects of overtime law, how to calculate it accurately for non-exempt employees, and legal consequences when violating it.

Who Qualifies as Non-Exempt Employees in California?

Before diving into the calculations, it's crucial to identify which employees are considered non-exempt in California. Non-exempt employees are those entitled to overtime pay for hours worked beyond a certain threshold. This generally includes most hourly workers and some salaried employees. To find more about exempt v. non-exempt classification, see our article Employee Misclassification - Exempt v. Non-Exempt.

Calculating Overtime for Non-Exempt Employees

California law dictates specific rules for calculating overtime pay. Here's a breakdown of the essentials:

Regular Rate of Pay: Overtime pay is typically calculated based on an employee's regular rate of pay, which includes not only their base hourly wage but also certain bonuses, commissions, and other forms of compensation.

Overtime Threshold: In California, overtime is typically due when an employee works more than eight hours in a single workday or more than 40 hours in a workweek. Additionally, overtime is owed for the first eight hours worked on the 7th consecutive day of work in a workweek.

Overtime Rate: Once you've determined the regular rate of pay, overtime pay is usually calculated at 1.5 times the regular rate for hours worked beyond the thresholds mentioned above.

Double Time Rate: For hours worked beyond 12 in a single workday, the rate increases to double the regular rate. More than 8 hours on the 7th consecutive day in a workweek also requires to pay double time.

Example Scenarios for Overtime Calculation

Let's illustrate this with a few examples:

Example 1: An employee earns $15 per hour and works 50 hours in a workweek. Their overtime pay would be calculated as follows:

  • Regular rate of pay: $15
  • Overtime hours: 10 (50 – 40)
  • Overtime pay: $15 * 1.5 * 10 = $225

Example 2: An employee earns a salary of $800 per week. They work 10 hours on Monday, 8 hours each on Tuesday, Wednesday, and Thursday, and 5 hours on Friday. They also work 8 hours on Saturday.

  • Total hours worked: 47
  • Overtime hours: 7 (47 – 40)
  • Regular rate of pay: $80 ($800 / 40 hours)
  • Overtime pay: $80 * 1.5 * 7 = $840

When a nonexempt employee is paid a set salary, that salary is considered payment only for their regular hours, even if they have a different agreement in private. California labor laws generally do not allow employers to enter into contracts that provide a fixed amount of payment to cover overtime hours for non-exempt employees. Overtime pay must be calculated based on the actual hours worked, and employees must receive the appropriate overtime rate for those hours.

All Work Hours Must be Considered

Employers must include all their employees' work hours under their control in calculating overtime wage, not just the time spent producing pieces or performing tasks directly tied to their work and services. Following are examples employers commonly miss when calculating their employees work hours:

  • Rest and Recovery Periods: Rest periods as mandated by California labor laws are considered hours worked and should be paid accordingly.
  • Interrupted Meal Time: 30-minute meal time must be uninterrupted. If you gave your employee meal time but it was interrupted by his work, you must include such meal time towards his working hour and consider the hour when calculating overtime as well. Note that if employees were relieved from all duties while taking their meal breaks, those meal periods are normally not considered hours worked.
  • Waiting Time: Any time spent waiting for work assignments, equipment setup, or other tasks while under the employer's control is considered hours worked.
  • Travel Time: Travel time between job sites or locations during the workday is typically counted as hours worked.
  • Training Time: If the employer requires training, meetings, or other work-related activities, this time is generally considered hours worked.
  • Known off-the-Clock Time: California employers may be liable for off-the-clock work if they knew or should have known that employees were working extra hours without reporting the time.

Consequences of Overtime Violation

Employers in California who violate overtime laws can face various consequences. Some of the key consequences include:

  1. Back Pay for Unpaid Overtime Compensation: Employers may be required to pay affected employees the unpaid overtime wages they are owed.

  2. Liquidated Damages: Federal law requires employers to pay liquidated damages in certain cases, which can amount to double the unpaid overtime wages. 

  3. Civil Penalties: The state labor agencies may impose civil penalties on employers who violate overtime laws. These penalties can vary depending on the severity and frequency of the violations.

  4. Wage Statement Penalties: If overtime violation is found, it is common for the affecting employee's wage statements to be found as inaccurate. If an employer paid overtime hours as employee's regular rate, it would have likely stated the regular rate for the overtime hours, instead of overtime rate, in the employee's pay stubs. Employers will face penalties $50 for the initial pay period, $100 for subsequent pay periods, up to $4,000.  

  5. Waiting Time Penalties: Because employers are considered not paid these overtime payments, they are also obligated to pay penalties for not paying them on time. Employers will face late payment penalty calculated by employee's daily average wage for each day the wages are not paid, up to a maximum of 30 days.

  6. Class Action Lawsuits: Employees who have been affected by overtime violations may choose to file class-action lawsuits against their employer, potentially leading to significant financial liabilities.

  7. Legal Costs: Employers may be responsible for covering the legal costs and attorney's fees of the employees, on top of their own attorneys' fees, who filed overtime violation claims against them. 

  8. Government Audits: Violations may trigger investigations and audits by state labor agencies, such as the California Division of Labor Standards Enforcement (DLSE) or the Employment Development Department (EDD). These investigations can be time-consuming and may result in additional penalties and fines.

Consult Our Office Today

Navigating California's complex employment laws, including overtime requirements, can be challenging for employers. As an employment law specialist with years of experience, I can provide the guidance and expertise needed to ensure compliance, avoid legal pitfalls, and protect your business.

If you have questions or concerns regarding overtime requirements or any other employment law matters in California, don't hesitate to reach out to our office. With a proven track record of advocating for employers, I'm here to help you navigate the legal landscape and safeguard your business. Contact us today by filling out our ONLINE FORM or calling us at (310) 769-6836 to schedule a free consultation and put your employment law worries to rest.

About the Author

Grace H. Gil, Esq.

Grace H. Gil is a California attorney specialized in business, employment and real estate law. She has handled a wide range of civil and business disputes and transactions. Ms. Gil has worked at law offices handling various business litigations. She also worked as an in-house counsel and handled various business affairs most business owners face.

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