California mandates overtime pay at 1.5 times the regular rate for work exceeding eight hours per day or forty per week. Employers must calculate overtime correctly, considering bonuses, multiple pay rates, and employee classifications under state labor laws.
By Brad Nakase, Attorney
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When it comes to overtime pay in particular, California’s labor laws are among the strongest in the nation. It is your duty as an employer to be familiar with both federal and California overtime regulations. When it comes to overtime, the state’s rules are more protective of workers than their federal counterparts.
If an employee works more than eight hours per day or forty hours per week in California, their employer is required to pay them overtime. If an employee works more than the required number of hours in a given workweek, they will be paid an overtime rate equal to 1.5 times their regular salary. Among the many topics covered in this comprehensive guide to California’s overtime laws are regular pay, the effect of bonuses on overtime calculation, minimum wage requirements, and the regulations pertaining to different employee classifications.
To accurately calculate overtime pay, you need to know what the regular pay rate is. Compensation can be in the form of an hourly wage, a salary, commissions, piecework, or a bonus. When determining an employee’s regular rate of pay, employers must take into account all payments received by the worker, not just their hourly wages.
It’s crucial to keep in mind that the regular rate of pay can’t go below the state-mandated minimum wage. The minimum wage in California is subject to regular raises and varies based on the size of the employer.
A worker’s standard hourly wage is determined by dividing their weekly earnings by their total number of hours worked. The rate in question must be higher than the minimum wage in effect.
The inclusion of bonuses in the computation of overtime compensation is subject to several exceptions. When calculating overtime pay in California, all of an employee’s income must be considered. Regular pay rates are subject to change during bonus periods when certain types of bonuses are in effect.
To be in compliance in California, you must understand the connection between bonuses and overtime pay. When determining whether an employee is eligible for overtime compensation, the Fair Labor Standards Act (FLSA) and California’s labor laws specify the formula to use, which takes into account both wages and bonuses.
Employers in the state need to be knowledgeable about the various bonus structures and how to factor them into the base salary.
There are a number of different types of bonuses, but in California, the two most common are discretionary and non-discretionary.
When calculating overtime, the regular pay rate only includes non-discretionary bonuses. Here’s an example to help you understand:
A worker puts in 45 hours per week and gets $20 per hour as a base salary. If the employee meets or exceeds the company’s sales goal, they will also receive a $200 non-discretionary performance bonus.
The formula for determining the standard pay is outlined below:
(40 hours × $20) + (5 hours × $30) + $200 bonus = $800 + $150 + $200 = $1,150 is the total earnings.
The hourly rate of pay is $25.56 as calculated by dividing $1,150 by 45.
The overtime rate is $38.34 and is calculated by multiplying $25.56 by 1.5.
Earnings from overtime are $191.70, calculated as 5 hours multiplied by $38.34.
The total weekly earnings, which would include overtime pay and the bonus, would therefore amount to $1,150 plus $191.70, which would equal $1,341.70.
The majority of California employers are required to pay their employees $16 per hour as of January 1, 2024. A higher minimum wage of $20 per hour will be required of employers who work for fast food restaurants starting April 1, 2024. Starting June 1, 2024, the minimum wage rate requirements for healthcare facility employers will also be higher. The increased minimum wage for these businesses will be $25/hour.
The process of calculating overtime pay for hourly workers is simple under California law. Here is the formula for calculating overtime:
For the first eight hours of the seventh consecutive workday, as well as for hours worked beyond eight and up to twelve in a day or forty in a week, employees receive 1.5 times the regular hourly wage.
For every twelve hours worked in a single day, or every eight hours worked in a seven-day workweek, employees receive double their regular wage rate.
Salary workers determine their regular rate of pay by dividing their yearly salary by 52, which gives them the rate for the week. Then, they divide that rate by 40, which gives them the rate for the hourly wage. After that, the process for determining overtime pay is identical to that for hourly workers using their base pay rate.
It is common practice to divide weekly earnings by total hours worked to determine a pieceworker’s regular pay rate. After that, they receive a flat rate for overtime that is 1.5 times their regular wage.
Before determining the regular pay rate, commission-based workers add their hourly earnings to their commissions and divide by the total number of hours worked.
When an employee is paid at more than one rate, the regular rate is calculated by averaging all of the rates. To get the weighted average, divide your total earnings by your total working hours.
To better grasp this, let’s look at an example:
Imagine an employee has two different pay rates in one week:
30-hour workweek at $20/hr
Twenty hours at $25/hour
Fifty hours total work time
Step 1: Get the grand total of all rates’ earnings
$600 ($20/hour x 30 hours)
$500 ($25/hour x 20 hours)
The sum of $600 and $500 is $1,100.
Step 2: Fifty hours of work
Step 3: Determine the average weighted pay rate
Earnings divided by total hours worked is the weighted average pay rate.
Pay rate as a weighted average is $22/hour ($1,100/50).
Step 4: Determine Payment for Overtime
Deducting 40 regular hours from 50 total hours equals 10 hours of overtime
To calculate overtime pay, multiply 1.5 by $22/hour, which comes to $33/hour.
Earnings from working 10 hours at $33 per hour is $330.
Step 5: Weekly Pay Total
Hourly wage (40 hours * $22) = $880
Total compensation for overtime is $330.
The sum of $880 plus $330 equals $1,210.
Hourly, salaried, and commission-based employees are all subject to California’s overtime regulations. Eligibility, however, is conditional on aspects like work responsibilities, pay rate, and the type of employment relationship.
Employees who are 18 years of age or older (or 16 or 17 years old and legally permitted to work instead of attending school) will be eligible for overtime unless they are in the exempt category of workers.
The bare minimum to qualify for overtime is as follows:
The overtime protections of California law do not apply to all employees. This includes the below groups:
Employees who are considered exempt from overtime pay laws are nonetheless subject to higher minimum wage standards and have specific responsibilities that correspond to their exemption.
Collective bargaining agreement-covered unionized employees are exempt from California’s OT laws. This, however, holds only in the event that the overtime rules established by the CBA differ from those of California law.
These three requirements must be met for the agreement to be valid:
Further, the CBA’s provisions shall have final say. In the absence of such guarantees, unionized workers in California are subject to the state’s minimum wage and other labor regulations.
Unauthorized overtime occurs when a worker puts in more hours than what their employer has approved.
The California overtime regulations are crystal clear, regardless of whether the extra hours were authorized or not. Everything an employee does, even unapproved overtime, is the responsibility of the employer. It is not possible to deduct overtime pay as a form of discipline.
To minimize the possibility of overtime abuse, employers should implement efficient scheduling practices along with stringent authorization procedures.
In addition to being a legal requirement under California labor laws, efficiently managing overtime is essential for workforce management. Overtime pay laws are complex, and employers still have a duty to pay their workers a living wage in accordance with federal and state laws.
This section outlines the duties and entitlements of business owners.
The onus is on employers to keep meticulous records of all employee time worked, including overtime. In addition to accurately compensating employees, business policies on overtime must adhere to federal and state laws concerning overtime pay.
Unless otherwise specified in the employer’s policy or any relevant collective bargaining agreements, employees in California have the right to refuse overtime pay. But in case of an emergency, some jobs—like those involving health and safety—require extra hours.
Fair notice is not required by law, but employers should give it if the overtime is mandatory. In order to keep workplace conflicts to a minimum and encourage productive time management, it is critical to cultivate a positive work culture.
It is the legal obligation of employers to pay their employees accurately for overtime. Not doing this can lead to legal consequences, such as having to pay back wages, fines, and compensation for damages.
1. Is the employer liable for paying an employee’s unauthorized overtime?
Employers are obligated to compensate workers for all hours worked, including unapproved overtime, according to the guidelines set forth by California labor law. It is crucial to remember, though, that refusing to pay for hours worked should not be a part of disciplinary measures against unapproved overtime.
2. Is it possible for an employee to give up their right to overtime pay?
No, California law does not permit workers to give up their right to overtime pay. An agreement to forego overtime compensation is null and invalid.
3. What penalties do employers face for retaliating against an employee’s overtime?
Wage theft occurs when employers punish workers who stand up for their rights. It is illegal to retaliate against an employee by laying them off, demoting them, or cutting their hours or pay. Penalties may include civil fines, damages, reinstatement, and back pay.
4. When it comes to general overtime rules, are there any exceptions?
Some common exceptions are as follows:
Those in the administrative, executive, and professional categories who fulfill certain requirements are exempt.
Different collective bargaining agreements outline different overtime regulations for unionized employees.
Employees can follow alternate workweek schedules that let them work longer hours each day without earning overtime pay, as long as the schedule is set up according to the law.
5. Can an employer make an employee put in extra hours?
It is legal for employers to set their own work schedules and demand overtime from their employees, provided they pay the proper overtime rates.
6. If an employee puts in unapproved overtime, what are the consequences?
Even if an employee works more hours than authorized, the employer is still liable for paying them. Nevertheless, workers who disobey company policy and work overtime without authorization may face disciplinary action.
Overtime is needed to keep up with higher production demands and to ensure customers get continuous service. But all businesses in California must follow the state’s overtime regulations. We hope this guide helps employers understand how to pay employees fairly and remain in compliance with California law.
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