Overtime Laws Businesses Should Know About
09.19.2022 | Employment Law
What Should Businesses Know About Overtime Laws?
California overtime laws can be a little complex for employers to understand. For many employers, a payroll service handles any overtime charges.
But most employers must have at least a passing understanding of overtime pay. Without understanding how overtime pay works, and more importantly, what it costs, businesses might face budgetary and legal difficulties.
Here are some facts that you should know about overtime laws in California.
Overtime is Mandatory for Wage Earners
Employers must pay overtime when it is due for most employees in California. For those who receive overtime, employers pay an overtime rate for work over eight hours in one day or six days in one workweek.
The overtime rate is one-and-a-half times the employee’s regular rate of pay for:
- Hours eight through twelve in a single day
- Hours one through eight on the seventh consecutive day of work in a week
The overtime rate increased to double the employee’s regular rate of pay for:
- Any time over twelve hours worked in a single day
- Any time over eight hours worked on the seventh consecutive day of work in a week
Once the workweek starts over, the pay rate also resets, with the employee receiving the regular rate of pay until the overtime thresholds are met again.
The Regular Rate of Pay Can Include More Than the Base Wage
If you normally pay shift differentials, non-discretionary bonuses, or commissions on top of wages, these things must be included in the regular rate of pay when you calculate overtime.
For example, suppose you pay $12 per hour for the day and evening shifts and $15 per hour for the graveyard shift. If an evening worker works overtime that runs into the graveyard shift, the overtime calculation must reflect the shift differential, instead of simply being based on the evening pay rate.
Some Workers are Exempt from Overtime Pay
Overtime pay does not apply to every type of work. Some of the classes of workers that are exempted from overtime pay include:
- Executives, administrators, and professionals (like lawyers and accountants)
- Employees of software companies
- Government employees
- Outside salespeople
- Relatives of the business owner
- Drivers regulated by state or federal law
- Union workers who have negotiated their pay rate
- Taxi drivers
- Commercial fishermen
- Professional actors
- Personal attendants
California law includes other exemptions from overtime, so businesses should check the overtime laws or speak to an employment law firm when setting up their payroll to make sure they comply with the law.
Some categories of workers are also excluded from the regular overtime pay rules and are covered by different overtime rules. These exceptions include:
- Minors
- Workers on an alternative work schedule, such as ten hours per day for four days per week
- Workers at residential facilities, such as assisted living centers or mental health centers
- Live-in employees
Most of these workers still receive overtime, but employers will calculate their overtime pay differently.
Agricultural Workers Receive Overtime Pay
The agriculture industry makes up a large part of California’s economy. Until 2019, California law exempted agricultural workers from overtime pay. But California has created a timetable that will gradually result in agricultural workers receiving the same overtime pay as other wage earners.
For operations that employ more than 25 agricultural workers, full overtime pay will be achieved in 2022. For operations that employ 25 or fewer agricultural workers, full overtime pay will occur in 2025.
Employers Must Pay Authorized and Unauthorized Overtime
California law defines authorized overtime as work that the employer knows — or should know — about. Employers must pay the overtime pay rate for all authorized overtime. So if a manager orders someone to work overtime, the employer “authorized” the overtime and must pay the overtime pay rate.
California law defines unauthorized overtime as work that the employer does not know about. The law requires the employer to pay unauthorized overtime, but allows the employer to discipline the employee for exceeding their hours.
Suppose an employee covers someone else’s shift without first notifying the employer as required by the employer’s rules. The employee has thus earned overtime for that shift. The employer must pay the overtime rate for the extra shift, but can fire the employee for violating the overtime rules as set by the employer.
Overtime Pitfalls
Even the most experienced payroll processor can erroneously pay or withhold overtime pay. A novice business owner is even more prone to making an overtime error. Consulting with an employment lawyer about your business, the type of work that your employees perform, and the regular pay structure that you use can prevent an overtime wage claim with the California Department of Industrial Relations.
Speak With An Overtime Law Attorney Who Can Protect Your Rights
To discuss your legal matter with an experienced employment lawyer in Orange County, please contact our law offices today.
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