How to calculate California’s overtime law and avoid legal issues.
What is The California Overtime Law and Requirements?
California overtime is to be paid to nonexempt employees who are 18 years of age or older. Employees who are 16 or 17 years old and not required by law to attend school are also eligible to receive overtime pay. This law includes nonexempt employees who are paid hourly, salary, and those who are paid on piece rate. These employees are required to receive one and one-half times their regular rate of pay for all hours over 8 hours in a workday and over 40 hours in a workweek.
California overtime law requires employers to pay these employees twice their regular pay when more than 12 hours are performed in a workday or more than 8 hours on their seventh consecutive working day.
Employees who are qualified must receive twice their standard pay when they work more than 12 hours in a workday. It is important to note that this law is different than the federal overtime law. The California overtime law does not apply to everyone and has many exemptions. If you are not sure who is exempt from the California overtime law, OnTheClock recommends visiting the State of California’s Department of Industrial Relations website.
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Who is Not Eligible For California Overtime?
Knowing who and who is not eligible for the California overtime law can be confusing. Most employees in the state of California are eligible to receive overtime pay and do not have to be a resident of California in order to qualify for California’s overtime laws. However, there are certain types of employees that are not entitled to overtime pay.
Employees that do not have a right to overtime pay include:
- Workers who hold a specific occupation with overtime rules.
- Employees who are labeled and classified as an outside salesperson.
- Some unionized workers involved in a collective bargaining agreement.
- Employees who are classified as exempt employees whose primary duties include executive, administrative, or professional roles.
An employee with executive exemption is an employee with executive capacity including:
- Duties and responsibilities involving the management of the organization or customarily recognized department or subdivisions in which the employee is employed through.
- Who regularly directs the work of two or more employees.
- A person of authority to hire or fire other employees.
- Who customarily and regularly uses discretion and independent judgment.
- Primarily engaged in duties that qualify as exemption.
- An individual whose monthly earnings are not higher by 2 times the state minimum wage for full-time employment.
An employee with administrative exemption is employed in an administrative capacity including:
- Earning more than twice the state’s minimum wage.
- Perform office or non-manual work.
- Someone who assists a proprietor or an employee who is employed in an executive or administrative capacity.
- Who is under only general supervision, works along specialized or technical lines requiring training, experience or knowledge.
A professional employee is a person employed in a professional capacity including:
- Someone whose job is in law, medicine, dentistry, optometry, architecture, engineering, teaching, accounting, art, and science that does not involve manual labor.
- Earns more than two times the state minimum wage for full-time employment.
For additional information on California’s overtime exemption rule, please visit the State of California Department of Industrial Regulations.
How Are Employees’ Wages Determined?
Overtime wages are determined by the employee’s hourly rate. We have broken down how California’s overtime pay is laid out based on employee hours worked. An employee’s overtime wage is determined by the amount of hours he or she performed in a workday and a workweek.
- Over 8 hours in a workday and 40 hours in a workweek = 1.5 x hourly rate.
- The first 8 hours on the seventh consecutive day of work = 1.5 x hourly rate.
- Hourly rate for work over 12 hours in a workday = 2 x hourly rate.
- The rate for over 8 hours on the seventh consecutive day of work = 2 x hourly rate.
1.5 x hourly rate is also known as time and a half. 2 x hourly rate is known as double time.
How Time and a Half Pay is Calculated
Time and a half pay is calculated by taking the employee’s regular hourly wage and adding 50% (half) to it. For example, if an employee makes $20 per hour for regular pay, then their time and a half hourly pay would become $30 per hour.
- Regular pay = $20/hour.
- $20 divided by 2 = $10.
- $20 (regular) + $10 (half) = $30/hour for time and a half overtime pay.
If the qualified employee is salary, then you would calculate their hourly rate by dividing their annual salary by 52 (number of weeks in a year) and then divide by 40 for the number of hours in a workweek. For example, if an employee earns $60,000 annually, you would divide 60,000 by 52 which equals $1,154 (rounded to the nearest dollar). Next, divide $1,154 by 40, and the regular hourly rate for this employee would be approximately $28.85/hour.
- Annual salary of $60,000 divided by 52 = $1,154 (rounded to nearest dollar).
- $1,154 divided by 40 = $28.85 regular hourly rate.
- $28.85 divided by 2 = $14.43.
- $28.85 (regular) + $14.43 (half) = $43.28/hour for time and a half overtime pay.
How Double Time Pay is Calculated
When an employee is earning double time instead of time and a half, their regular hourly wage is doubled. If the employee is making $20 per hour, then the double time hourly rate would now become $40 per hour.
- Regular hourly wage = $20
- $20 multiplied by 2 = $40/hour of double time overtime pay.
What Defines a Workday?
According to the Department of Industrial Relations, a workday is defined as a consecutive 24-hour period that begins at the same time each calendar day, but it may begin any time of day. The beginning of an employee’s workday need not coincide with the beginning of that employee’s shift, and an employer may establish different workdays for different shifts.
The Department of Industrial Relations also explains that once a workday is established it may be changed only if the change is intended to be permanent and the change is not designed to evade overtime obligations. Daily overtime is due based on the hours worked in any given workday; and the averaging of hours over two or more workdays is not allowed.
Source: State of California Department of Industrial Relations
Defining a Workweek
A workweek is 168 hours during a seven consecutive 24-hour time period. A workweek is fixed, starting with the same calendar day each week beginning at any hour on any day and recurring. An employee’s work week may change only if the change is intended to be permanent and is not designed to evade the employer’s overtime obligation.
Source: OnTheClock and State of California Department of Industrial Relations
Tracking Hours and Paying Overtime in California
California law requires employees to track their hours worked. This includes the beginning and end of an employee’s shift. Start and stop times for meal breaks must also be tracked and documented. Employers will use the time data to calculate hours worked for the workday and workweek.
Since employers have to determine hours that are worked in a workday and workweek, employees’ pay must accurately be accounted for. The employer has to itemize overtime hours worked in a workday and workweek. This valuable data will ensure that employees are being paid for the time they worked, and it also keeps the employer in good legal standing.
Overtime is not owed to employees who have taken a day off during the workweek. Some employees may use a sick or vacation day at times, but these hours are not counted towards overtime. For example, if an employee has worked 40 hours and decided to use 8 hours of paid time off for the next day, they would not be compensated overtime pay for the 8 additional hours over 40 for the workweek.
Tracking daily and weekly hours worked can be time consuming and complex. This is why thousands of California companies choose to use an employee time clock system. OnTheClock offers a robust time clock for businesses to track their employees’ hours worked, while providing a detailed breakdown of overtime hours per workday and workweek. This time data reflects automatically on each employee’s time card.
It is imperative that employers keep up with employee time tracking. Some employees may be entitled to time and a half of overtime pay for a workday, others may be entitled to double time, and some employees simply may not receive any overtime hours. According to SHRM, California law requires that overtime wages be paid no later than the regularly scheduled payday of the payroll period following that in which overtime was earned. However, any straight time hours worked must be paid on the regular payday of the payroll period in which they were earned.
California Overtime Frequently Asked Questions
Q: What if an employer doesn't pay me my overtime wages?
A: You can file a wage claim with the Division of Labor Standards Enforcement or file a lawsuit against the employer. Additionally, if an employee no longer works for an employer, they can claim for the waiting time penalty pursuant to Labor Code Section 203.
Q: Can an employee waive their rights to receive overtime pay?
A: The answer is simply no. The state of California requires an employer to pay employees all overtime compensation.
Q: When must employees be paid for their overtime hours?
A: Wages due to overtime must be paid no later than the payday on the next regular pay period after the overtime was worked.
Q: Can employers require their employees to work overtime?
A: Yes. Since the employer may determine an employee’s schedule, they have the right to discipline employees who do not abide by the scheduling rules, including overtime hours. It is important to note that employees cannot be disciplined for refusing to work on the 7th day in a workweek.
Q: Are salaried employees entitled to overtime pay?
A: Salaried employees who are entitled to overtime compensation unless they are considered exempt by state and federal law.
Q: Do employers have to pay employees for unauthorized overtime hours?
A: Authorized or not, employers must pay their employees for all overtime hours that are worked.
OnTheClock helps California business owners comply with overtime laws.
OnTheClock has helped over 30,000 companies track over a 1/2 billion hours worked.