07.14.2021 | Newsletters

When do I have to pay my employees overtime?

California overtime laws contain several traps for the unwary, and we’ve seen some recent claims because of employers’ misconceptions. In this article, we review some important points about calculating overtime, and what can happen if you make a mistake.

In general, California employees are entitled to one and one-half times (1.5) their regular rate of pay for:

  • Hours more than 40 hours in a workweek;
  • Hours more than 8 hours and not more than 12 hours in a workday (even if the employee works less than 40 hours in the workweek); and
  • The first 8 hours on the seventh consecutive day of work in one workweek.

And, California employees are entitled to two times their regular rate of pay for:

  • Hours more than 12 hours in a workday; and
  • Hours more than 8 hours on the seventh consecutive workday in a workweek.

Agricultural employers are still in the process of “phasing in” to the above rules. For example, agricultural employers with 25 or more employees do not pay overtime until after 8.5 hours of work in a workday or 45 hours in a workweek. For detail on overtime for agricultural employees, you should review Industrial Welfare Commission Wage Order 14.

Other exceptions to the general rules include certain truck drivers, employers who have properly adopted an alternative workweek schedule, and employers with collective bargaining agreements that meet certain requirements.

All hours worked, including travel time hours, are counted in determining when employees have worked enough hours to qualify for overtime.

Unpaid overtime can turn into a big liability, especially if an employee separates from employment and does not receive all wages due in a timely fashion. At that point, the “waiting time penalty” begins to accrue at the rate of a day’s wages per day until the unpaid wages are paid, to a maximum of thirty days.

To take an example from a client’s recent unfortunate incident:

The employer thought that overtime was owed if an employee worked both more than eight hours in a day and more than forty hours in the workweek. An employee who worked only four days in total worked one nine-hour day and three eight-hour days and then resigned. The employee was paid straight time for all hours worked, but no overtime for the ninth hour on the nine-hour day because he had not worked 40 hours in the workweek. A few months later, the employer received a demand for the $15.00 of unpaid overtime, plus the waiting time penalty of $7,200.00 ($30/hours x 8 hours/day x 30 days), plus interest and attorneys’ fees.

So, take a few minutes to ensure that your payroll practices comply with overtime laws. It could save you money in the long run.

Related practice team: Labor and Employment

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