California Overtime Law: What employers need to know

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When you own and operate a business, it’s important to consider the rights of your employees. If you don’t know what these rights are, you’re more likely to overlook them, which can result in legal consequences. When an employee works more than a set number of hours during the day, they are typically owed overtime pay in California. This guide takes a look at what the California overtime law is and how overtime can be calculated.

What Does the California Overtime Law Entail?

Overtime wages are payments that employers must make when employees work more than a set number of hours per day or week. The majority of employees who work in California have access to overtime wages. The amount of overtime pay that an employee receives depends on how much they worked. The overtime rate can be applied as time and a half or double time. Time and a half indicates that the employee should receive 1.5x their regular rate of pay. Double time indicates that the employee should receive 2x their regular rate of pay.

Time and a Half Overtime

Employers must pay the time and a half overtime rate when:

  • An employee works for longer than eight hours in a given day,
  • An employee works for a seventh consecutive day,
  • Or an employee works for more than 40 hours in a standard workweek

Double Time Overtime

The double time overtime rate occurs when:

  • An employee works for more than eight hours when they have already worked for seven consecutive workdays,
  • Or an employee works for longer than 12 hours in a single workday

Under the wage and hour laws in California, many employees claim that overtime hasn’t been paid. In many cases, employers fail to understand these laws, which leads to unpaid overtime. It’s possible to avoid these issues by learning when overtime applies to your employees. Overtime wages also push employers to bring in additional employees to avoid making overtime payments. Since these laws benefit the state of California by contributing to better employment rates, California will oftentimes rule in favor of employees. Two sets of laws dictate overtime in CA. These include section 510 of the California Labor Code and the Fair Labor Standards Act. When federal and state laws differ, the law that’s considered to be more favorable to the employee is applied.

Which Employees Can Obtain Overtime Pay?

Most employees in California are entitled to overtime pay. Since most employees qualify for overtime, it’s easier to look at the employees who don’t receive overtime pay, which include:

  • Outside salespersons
  • Employees in certain occupations that have their own overtime rules
  • Exempt employees, such as those who performs professional, executive, or administrative duties
  • Some unionized workers who must adhere to a collective bargaining agreement

To be exempt under California overtime law, an employee’s salary must be at least 2x higher than the state’s minimum wage. As for outside salespersons, this type of employee is someone who:

  • Is 18 years old or older,
  • Sells contracts, items, or services,
  • Spends at least half of the time that they work being away from the employer’s place of business

How to Calculate Overtime Wages

If your employees are owed overtime wages, it’s important that you understand exactly how these wages are calculated. As touched upon previously, there are five separate situations where an employee would receive at least some overtime pay. While federal law states that overtime wages must be paid when an employee works for longer than 40 hours in a single workweek, California overtime laws go further than this by also requiring overtime if the employee works for more than eight hours during a single workday or works on at least seven consecutive workdays without having a day off. In these cases, overtime will be paid at 1.5x the employee’s regular hourly pay. However, the overtime pay must be 2x if the employee works for more than 12 hours per day.

Keep in mind that employers are responsible for dictating when a workweek starts, which is usually Monday. While overtime must be paid when an employee works for seven consecutive days in a workweek, this law is relatively strict. If the workweek begins on a Monday, an employee who works from Monday to Sunday would receive overtime for the work that they performed on Sunday. However, someone who works from Wednesday to Tuesday would not receive overtime since the work would occur over two separate workweeks.

How Pay With Overtime Compares to Pay Without Overtime

Let’s say that a cashier earns the minimum hourly wage, which is $13 per hour in California. If they worked for six hours every day from Monday-Thursday, their wages would be $312 and would not include overtime. On Friday, the employee works for 13 hours due to a rush of customers. In this situation, the employee would earn overtime wages for hours 9-13 on Friday. For hours 9-12, the overtime wages would be $19.50, which is 1.5x higher than the standard rate. For the 13th hour, the wages would be 2x higher than the standard rate, which amounts to $26 per hour. If overtime wages weren’t in place, the employee would only receive $481 for the five days they worked. When overtime wages apply, the employee would receive $520.

How the California Overtime Law Impacts Employers in Retail, Restaurant, and Grocery Industries

If your business operates within the retail, restaurant, or grocery industry, it’s important to understand how California overtime laws affect you. In the restaurant industry, most of your employees will qualify for overtime if they work for more than a certain number of hours during a workday or workweek. When you’re calculating how much overtime pay your employees should receive, you should not include tips. In the state of California, tips placed on a credit charge or left on the table belong to the employee. Tips can’t be used to cover minimum wage expenses or overtime wages.

As for retail and grocery, the basic overtime laws that apply to the majority of industries also apply to employers in these industries. Depending on the number of hours that an employee works in a given workday or workweek, overtime wages should be paid as 1.5x or 2x more than the regular rate of pay. In the retail and grocery industries, overtime is common around the holidays. Many employers try to get around holiday overtime by hiring temporary workers, but be careful: fair workweek laws in some areas may put limitations on this practice. If you manage a store or restaurant, you should have a good idea of which weeks and months of the year are busier than others. With this information in mind, you can avoid paying high overtime wages by taking preventive measures.

Common Issues with Overtime

While the overtime law in California is relatively simple, there are some tricky pieces to pay attention to. For instance, the standard commute to and from work doesn’t typically count as a portion of the workday, which means that overtime rules wouldn’t apply. However, if the job site is temporary and is placed farther away from the employee’s home when compared to the place where they usually work, the commute could count as a portion of the workday. Also, if an employee performs work that hasn’t been authorized by their employer, but the employer reasonably should have known about, overtime wages would still need to be paid. However, overtime wages don’t apply if the employee initially concealed the unauthorized work that they were performing.

You can effectively avoid paying overtime wages in a few different ways. First, by hiring more workers. Though, as was mentioned before, there may be fair workweek regulations in your area that prevent this, in some cases. Second, by scheduling your staff more efficiently. This is the more effective solution, as optimizing your labor can have multiple benefits for your business, including a better customer experience and lower labor costs. On top of that, a good scheduling software will automatically help you stay compliant and will warn you if your staff are approaching overtime. An especially good software, like TimeForge, will not only calculate unavoidable overtime for you but can also prevent penalties from missed meals and breaks, too.

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