Despite being the third most expensive state in the US, California overtime laws are generous to hourly employees.
But, managing overtime can get messy when you run a business where:
- Employees have flexible working hours
- Not every employee is paid by the hour
- Not everyone is entitled to overtime pay
Since it can be easy to miscalculate overtime hours, understanding the exceptions, exemptions, and special circumstances of California overtime laws is essential for staying compliant and avoiding penalty fees.
In this article, we’ll look at which workers are entitled to and exempt from overtime pay, how to calculate payments, and how Homebase can help you track overtime.
Which employees are entitled to overtime in California?
Let’s start by looking at who has the right to receive overtime, and how much.
According to the State of California, non-exempt employees must earn x1.5 their hourly pay for additional work when:
- They’re 18 years old or older (or 16 to 17 when they have no restrictions to work)
- They work more than 8 hours a day, 40 hours a week, or 6 days a workweek
Workers are also entitled to double their regular pay rate when:
- They work more than 12 hours a day
- They work more than 8 hours on their 7th workday of the week
As the California labor code 510 explains:
“(a) Eight hours of labor constitutes a day’s work. Any work in excess of eight hours in one workday and any work in excess of 40 hours in any one workweek and the first eight hours worked on the seventh day of work in any one workweek shall be compensated at the rate of no less than one and one-half times the regular rate of pay for an employee. Any work in excess of 12 hours in one day shall be compensated at the rate of no less than twice the regular rate of pay for an employee. In addition, any work in excess of eight hours on any seventh day of a workweek shall be compensated at the rate of no less than twice the regular rate of pay of an employee.”
But what type of employees are non-exempt?
In a nutshell, non-exempt employees are covered by the Industrial Welfare Commission Wage Orders, which includes hourly workers like:
- Cashiers
- Servers
- Retail associates
- Drivers
- Bartenders
- Cooks
- Janitors
- Guards
Note: Workers are only entitled to overtime for the hours that they worked during the week. For example, working on a day off only counts as overtime if the employee worked the rest of the week as normal. This means they won’t receive overtime if they’re compensating for a sick day.
Which employees are exempt from overtime laws?
It’s the law — and not an individual business — that determines whether an employee is exempt or not.
The specific categories of exempt employees who are not eligible for overtime pay include:
- White-collar employees with executive, administrative, and professional roles who earn at least double the minimum wage
- Employees in the computer software industry who earn more than $41 per hour
- Salespeople who spend more than half of their time outside of the business location
- Government employees
- Taxicab drivers or any driver whose hours are regulated by the US Department of Transportation Code of Federal Regulation
- Professional actors
Note: the details and salary conditions of every category are extensive and specific. It’s recommended to consult a professional to decide if your employees are exempt or non-exempt from overtime.
Minimum wage in California
You can’t reduce overtime by paying a fixed salary to your employees.
To stay in compliance with the law, you also need to ensure the regular rates of pay are over the minimum wage.
This is because all rates of pay must meet the California legal minimum wage, which became $15.50 per hour in January 2023. Regardless of the compensation type ( hourly rates, salaries, commissions, and even “piecework earnings”), you must calculate the “regular rate of pay” by dividing the total compensation by the agreed regular hours (i.e. their hourly wage).
This, as long as an employee works fewer hours than California’s legal maximum. So if an employee works an agreed 30 regular hours per week, they won’t be entitled to overtime until they exceed 40 hours per week or meet any other overtime regulation.
Note: In the instance where workers earn two or more rates of pay in one workweek, you must use a weighted average. To calculate it, divide the total workweek earnings by the number of hours the employee worked, and make sure that it’s more than the minimum wage.
How much is overtime pay in California?
Calculating overtime pay is simple, as the rates set by the California DIR say:
“1. One and one-half times the employee’s regular rate of pay for all hours worked in excess of eight hours up to and including 12 hours in any workday, and for the first eight hours worked on the seventh consecutive day of work in a workweek; and
2. Double the employee’s regular rate of pay for all hours worked in excess of 12 hours in any workday and for all hours worked in excess of eight on the seventh consecutive day of work in a workweek.”
In short, you only need to multiply the regular rate of pay by 1.5 or 2, track how many overtime hours were worked, and add it to the total salary.
Examples for calculating overtime pay
Although calculating overtime pay is simple most of the time, tracking overtime hours can get tricky in a few situations.
For instance, depending on the start of your workweeks and workdays, an employee might not be entitled to overtime pay despite working more hours or days in a row.
- If you run a club that starts its workdays at 6 PM, an employee might not be entitled to overtime if they work from 4 PM to 2 AM. This is because the period between 4 and 6 PM belongs to the previous workday.
- If you own a restaurant that starts the workweek on Wednesdays, an employee that worked 8 hours from Monday to Sunday might not be entitled to overtime. In this case, Monday and Tuesday belong to the previous workweek schedule.
Note that there must be a legitimate business reason to start your workdays and weeks at different times. It’s not arbitrary.
However, these employees would still be entitled to overtime pay if they worked their normal schedule. Let’s look at these specific examples:
- If the club employee worked their normal hours the day before. The two-hour period they worked between 4 and 6 PM would count as overtime for the previous day. At a rate of $20/hr, they’d be entitled to (1.5 × $20/hr × 2hrs) + ($20/hr × 8 hrs) = $220 for that day.
- If the restaurant employee worked every regular workday of the previous workweek (Wed to Sun). Then they would be entitled to receive overtime for working Monday and Tuesday. With an hourly pay of $20/hr, the total payroll for the week would be: ($20/hr × 40 hrs) + ($30/hr × 16 hrs) = $1280
As a business owner, this means you can reduce labor costs by coordinating with your employees to free some hours on their regular timesheet. For example, you could have them work 6 hrs each workday so they can work a 6th day without overtime.
How to track overtime hours accurately
The hardest part of calculating overtime pay is, by far, tracking the hours correctly.
There’s no way around it, as the California DIR says that “an employer has the duty to keep accurate time records and must pay for work that the employer allows to be performed and to which the employer benefits.”
Homebase users have an advantage, as the app can track employee work hours and overtime automatically. It provides free tools to stay compliant with the law, as well as save enormous amounts of time on managing hourly employees.
With Homebase, the process to set up overtime tracking is quite simple:
- Click “Settings” on the sidebar → Time tracking → Overtime
- Set the overtime rate based on the California laws we mentioned earlier (x1.5)
- Check the double overtime requirements as it applies to California laws
- Check the 7th-day overtime requirements
- Set up holiday pay rates if they apply to your business
- Allow it to calculate the overtime pay for salaried employees
- Save changes
These settings are not only convenient for business owners, but they also improve retention for hourly employees by increasing wage transparency and trust.
By using Homebase to track overtime hours, you also get a stress-free solution for preparing payroll and controlling labor costs.
What are the penalties for violating overtime laws?
The fees and damages you need to pay for not correctly paying overtime can add up pretty quickly.
Especially, when you have multiple employees and you were unaware of their overtime rights for too long. For instance:
- If an employer doesn’t pay on time, they need to pay a damage fee for every period where the employee wasn’t paid correctly (in addition to the money they owe). According to the IWC wage orders, the damage fees are initially $50 per missed pay period, but it increases to $100 for subsequent violations.
- If an employer denies overtime pay, the employee can file a wage claim to the Division of Labor Standards Enforcement (DLSE). Here, the case can hopefully be resolved in a conference (if not, the case can escalate to a hearing where the court can enforce a judgment against the employer).
- If the employer misclassified an employee as exempt, they can start a lawsuit against the employer to pay the owed money, as well as liquidated damages and attorney’s fees.
If multiple employees are not receiving their rightful pay, they can also bring wage claims as class actions and represent an even higher expense for the business.
Overtime laws can be complex — but they’re necessary
California’s overtime laws can be complicated to understand. But having to manage your team’s overtime hours without getting a single detail wrong can take its toll on employers.
These laws are necessary to protect the workers, and complying with them is essential for their well-being and to avoid facing legal action.
By managing overtime with Homebase’s free time clock calculator, you can easily easily export or print timesheets that accurately calculate regular hours, overtime, double overtime, total pay, and more.
With Homebase, you get help staying compliant with California laws, save hours on administrative work, and even get new tools to control your labor costs.
FAQs about California overtime law
Can employees be forced to work overtime?
In simple terms, employers are entitled to set a worker’s schedule, and if they schedule overtime the worker must comply.
But there’s a limit, employees are guaranteed one rest day per workweek, so they can’t be forced to work a seventh day in a week.
Can employees earn overtime when having a salary?
Having a salary doesn’t make you exempt from overtime. The exemptions are dictated by state laws or IWC wage orders, and they depend on the category of the job and the wage.
Do employees have to accept overtime pay?
Yes, employees can’t waive their rights to overtime pay. Even if they’re willing to take regular compensation for these additional hours, the employer must follow the law and compensate the employee properly.
Can employers postpone overtime pay?
Not by much, overtime wages can only be delayed until the following payday after the employee earned them. However, workers’ regular wages still must be paid as usual and not delayed.
Are my bonuses subject to overtime rules?
Only if the bonuses are non-discretionary. They’re included in the calculation of the regular rate of pay when:
- It’s a flat sum bonus.
- It’s a production bonus.
The overtime multiplier of 1.5 or 2 still applies to those rates when the employee works overtime during the bonus-earning period.
Other payments including gifts, discretionary bonuses, or expense reimbursements are excluded from the regular rate of pay
If an employee puts in unauthorized overtime. Does the employer have to pay overtime rates?
Yes, although employers can discipline an employee for working overtime without authorization, the employer must pay for unauthorized overtime at the same rate.
This, as long as the employer knew or “should have known” that the employee worked extra hours.
However, this isn’t the case if the employee doesn’t communicate with the employer about working extra hours intentionally to file a wage claim later.
Which states have the best overtime laws?
California, along with New York, Illinois, Pennsylvania, and Colorado, has the most generous overtime laws for workers.
How can an employee recover unpaid overtime?
Either by filing a wage claim, a lawsuit, or class action if there’s more than one employee affected by unpaid overtime.
How long do I have to claim unpaid overtime?
Normally, employees can file for unpaid overtime for either 2, 3, or 4 years after the pay period, depending on whether they go to the Labor Commissioner or the court.
But after the pandemic, you can claim unpaid wages that go back to April 5, 2017.
Remember: This is not legal advice. If you have questions about your particular situation, please consult a lawyer, CPA, or other appropriate professional advisor or agency.
