California overtime law: New rules to follow
Most employees are entitled to overtime compensation for working more than 40 hours a week or more than eight hours in a day. Most states also follow federal law when calculating overtime and other wage and hour issues. However, California has introduced a new overtime law that is different (and stricter) than the current federal overtime law. This decision reflects a long history of employee-friendly California overtime pay laws. The California Supreme Court reinforced this principle on March 5, 2018, when it held the Alvarado v. Dart Container Corporation of California case and declined to follow federal rules and issued that employers must follow a more generous state formula for calculating overtime pay where employees receive a “flat sum” bonus.
Employers in California must follow both the federal standards and California laws that provide greater protections for employees. If you are a California employer you might feel overwhelmed by all the employment laws and labor regulations employers need to comply with. Employee management software can help manage and track overtime hours and cost. By implementing smart scheduling practices, employers can comply with overtime laws. Find out how employee management software can empower both employers and employees by scheduling a call with a Deputy rep below:
Keep reading to learn more about these overtime laws and employment changes so that your business can stay compliant.
What is California’s overtime law?
California has some of the most progressive labor laws in this country. Under California’s overtime law, employers are required to pay eligible employees overtime 1.5 times the employee’s regular rate for all hours worked in excess of 8 in a workday, in excess of 40 in a workweek, or for the first 8 hours worked on the 7th consecutive day worked in a workweek.
Double-time is required when those employees have worked more than 12 hours in a workday or worked in excess of 8 on the 7th consecutive day worked in any workweek.
These overtime laws have many exceptions and exemptions which can be confusing for both employees and employers. Miscalculating overtime can be a costly mistake. It’s crucial for employers to understand the basics of California’s overtime laws. Check the exemptions on the State of California’s Department of Industrial Relations website or get professional advice for more information.
What Constitutes as a Workweek in California?
In California, a workweek is seven consecutive 24-hour period of time that equates to a total of 168 hours. It can start at any hour of the day as long as the days are consecutive.
Once the days are set, the employer can not change the beginning of the workweek to avoid paying overtime unless the schedule adjustment is permanent.
Who does the law cover?
Eligible employees must be over 18 years or older, or over 16 and legally allowed to work instead of being at school, to be entitled to overtime pay.
California’s overtime law applies to all California employees unless they are:
- an independent contractor,
- an exempt employee under California wage and hour law, or
- subject to an alternative workweek schedule.
For a more detailed list of exempt employees, read this article from the State of California.
How to Calculate Overtime in California
In California, overtime is based on the regular rate of pay, which is the pay the employee would normally earn. The regular rate must include commissions, production bonuses, piecework earnings, and the value of meals and lodging.
The amount of overtime depends on the length of the employee’s shift and the number of days he or she has worked in the workweek. Use this calculator to determine the overtime pay for nonexempt employees in California.
Since calculating overtime in California is a complicated process, employers must take a close look at their bonus plans and overtime calculations to ensure compliance with the new law.
New: Calculating Overtime on Employee Bonuses
California Law states that the regular rate of pay must now be calculated differently in California than anywhere else in the country. This is the outcome of the recent decision in the Alvarado v. Dart Container Corp of Cal. case.
Now, for purposes of calculating the regular rate, a flat sum bonus is to be allocated only to the non-overtime hours worked. The Court emphasized that California has a “longstanding policy of discouraging employers from imposing overtime,” with California’s overtime laws “favoring an eight-hour day and a six-day 40-hour workweek.” With that, the court rejected the federal formula “because it results in a progressively decreasing regular rate of pay as the number of overtime hours increases, thus undermining the state’s policy of discouraging overtime work.”
As stated previously, calculating overtime in California differs from the Fair Labor Standards Act calculation. These differences can be summarized by the following formula from Honigman Law:
Fair Labor Standards Act
Bonus ÷ All Hours Worked = Bonus Regular Rate of Pay
Bonus Regular Rate of Pay x 0.5 x Overtime Hours = Bonus Overtime Premium
Bonus ÷ Non-Overtime Hours Worked = Bonus Regular Rate of Pay
Bonus Regular Rate of Pay x 1.5 or 2 x Overtime Hours = Bonus Overtime Premium
Employers in California should revisit their overtime policies and methods of calculation in light of this new decision.
For employees: What can I do if my employer fails to pay me overtime?
Employees have the right to a wage and hour lawsuit against their employer for failing to pay overtime as required by California overtime law. California has several laws in place to help employees pursue their overtime claims. To file a claim, contact an attorney or the Office of the Labor Commissioner.
In a successful overtime lawsuit, it’s possible to collect:
- the unpaid balance of the overtime compensation that your employer withheld from you
- interest on that amount
- reasonable attorney’s fees and litigation costs.
Helping You Stay Compliant
More states around the U.S are taking after California’s laws, affecting both employer and employee. It’s critical for employers to stay ahead of the curve and prepare for strict labor laws, regardless of what state they do business in.
Deputy is designed to help employers handle overtime issues, providing the flexibility and technology needed to track California overtime laws. For any business, it’s important to keep track of the number of hours your staff have worked. With Deputy, managers will receive alerts when employees are scheduled for too many hours per day or week, back-to-back shifts, or too many days in a given week. The Deputy scheduling platform will also automatically stop recommending someone for a shift if they are stressed. The stress profile feature will not only help comply with overtime laws, but it will also save on labor costing.
Download the spreadsheet below to calculate how much money you could be saving on overtime with Deputy:
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