California has specific rules that govern when overtime is due and how overtime is calculated. Below, we cover some of the trickier California-specific overtime scenarios.
General Overtime Requirements:
California requires employers to pay non-exempt employees 1.5 times their regular rate of pay for:
- Hours worked over eight in a workday;
- More than 40 hours worked in a workweek; and
- For the first eight hours worked on the seventh consecutive work day in a single workweek.
California also requires employers to pay non-exempt employees double their regular rate of pay for all hours worked:
- Over 12 in a workday; and
- Over eight on the seventh consecutive workday in a workweek.
Scenario 1: When Both Daily and Weekly Overtime Are Worked
When an employee works both daily and weekly overtime hours, there are three key points to remember:
- Employers don't have to compensate the same overtime hours more than once (also known as pyramiding). For instance, when an employee works 10 hours in one workday, the two daily overtime hours don't need to be counted as hours worked for the purposes of weekly overtime.
- When determining the total overtime hours due, compare the total daily/seventh-day overtime hours and the total weekly overtime hours and choose the greater number.
- When more than one overtime rate could apply, overtime hours must be compensated at whichever overtime rate is higher.
To help illustrate these points, here are two examples:
Example 1: |
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An employee's workweek runs Monday through Sunday. The employee works 9 hours each day Monday through Friday and then 13 hours each day on Saturday and Sunday. Step 1: Add the daily overtime hours and the seventh-day hours together and compare the total against the weekly overtime hours. To comply with state law, choose the greater of these two numbers as the total hours for which overtime pay is due.
In this case, there were 23 daily overtime hours/seventh-day hours and 31 weekly overtime hours so the employee is entitled to the greater of the two, or 31 overtime hours. Step 2: Determine the number of overtime hours that must be compensated at 2 times the employee's regular rate of pay. In this example, the employee worked one hour in excess of 12 hours on Saturday, and 5 hours in excess of 8 hours on Sunday (the seventh consecutive day she worked in the workweek)
Step 3: To determine the overtime hours due to the employee at 1.5 times their rate of pay, subtract the overtime hours compensated at 2 times their regular rate of pay from the total overtime hours due. 31 overtime hours due – 6 double overtime hours = 25 regular overtime hours due RESULT: This employee would be entitled to 6 hours of overtime at 2 times their regular rate of pay and 25 hours of overtime at 1.5 times their regular rate of pay. |
Example 2: |
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An employee's workweek runs Monday through Sunday. The employee works 10 hours each day Monday through Wednesday, 13 hours Thursday, and then has the rest of workweek off. Step 1: Add the daily overtime hours and the seventh-day hours together and compare the total against the weekly overtime hours. To comply with state law, choose the greater of these two numbers as the total hours for which overtime pay is due.
In this case, there were 11 daily/seventh-day overtime hours and 3 weekly overtime hours so the employee is entitled to the greater of the two, or 11 overtime hours. Step 2: Determine the number of overtime hours that must be compensated at 2 times the employee's regular rate of pay. In this example, the employee worked one hour in excess of 12 hours on Thursday, and no hours in excess of 8 hours on the seventh consecutive day in the workweek.
Step 3: To determine the overtime hours due to the employee at 1.5 times their rate of pay, subtract the overtime hours compensated at 2 times their regular rate of pay from the total overtime hours due. 11 total overtime hours due – 1 double overtime hour = 10 regular overtime hours due RESULT: This employee would be entitled to 1 hour of overtime at 2 times their regular rate of pay and 10 hours of overtime at 1.5 times their regular rate of pay. |
Scenario 2: Flat-Sum Bonuses and the Regular Rate of Pay
When determining an employee's regular rate of pay, you must include not only wages but also nondiscretionary bonuses and certain other types of compensation. A nondiscretionary bonus is announced to employees in advance, such as bonuses for meeting set production goals, retention bonuses, and commission payments based on a fixed formula. Most bonuses are considered nondiscretionary.
In 2018, the California Supreme Court issued a decision significantly impacting how employers must calculate overtime pay when non-exempt employees receive a flat-sum bonus. In California, a flat-sum bonus is generally considered to be a nondiscretionary bonus that does not increase or decrease based on the amount of time worked or production of the employee (for example, a $30 bonus for any employee who works Saturday, regardless of how many hours they work during the rest of the workweek).
The California Supreme Court ruled that when an employee receives a flat-sum bonus, it should be factored into their regular rate of pay by dividing the amount of the bonus by the total number of non-overtime hours actually worked during the relevant pay period. The employer should then use 1.5 (or 2), not 0.5, as the multiplier for determining the employee's overtime pay rate. This is different than the formula used under federal rules.
Here are two examples:
Example 1: |
An employee earns an hourly wage of $12 and receives a $100 flat-sum bonus in a workweek in which he worked 50 hours. For this example, let's assume we did the daily and weekly overtime analysis and determined the employee is entitled to a total of 10 overtime hours, all compensated at 1.5 times his regular rate of pay. Step 1: Divide the flat-sum bonus by the non-overtime hours worked. $100 divided by 40 hours = $2.50 per-hour bonus Step 2: Multiply the per-hour bonus by 1.5 and the hourly wage by 1.5 and then add those products. $2.50 per-hour bonus x 1.5 = $3.75 $12 hourly wage x 1.5 = $18 Employee's overtime pay rate = $21.75 (the regular rate of pay is $14.50 ($12 hourly wage + $2.50/hour bonus) Step 3: Multiply the employee's overtime pay rate by the number of overtime hours. $21.75 x 10 overtime hours = $217.50 in overtime compensation owed for hours 41-50 Step 4: Calculate total compensation. RESULT: $480 in hourly wages for hours 1-40 ($12 x 40 hours) + $100 bonus + $217.50 in overtime compensation for hours 41-50 = $797.50 in total compensation |
Example 2: |
An employee earns an hourly wage of $12 and receives a $100 flat-sum bonus in a workweek in which she worked 43 hours. For this example, let's assume we did the daily and weekly overtime analysis and determined the employee is entitled to a total of 11 overtime hours, and one of these hours must be compensated at 2 times her regular rate of pay. Step 1: Divide the flat-sum bonus by the non-overtime hours worked. $100 divided by 40 hours = $2.50 per-hour bonus Step 2: Multiply the per-hour bonus by 1.5 and the hourly wage by 1.5 and then add those products. $2.50 per-hour bonus x 1.5 = $3.75 $12 hourly wage x 1.5 = $18 Employee's regular overtime pay rate = $21.75 (the regular rate of pay is $14.50) Step 3: Multiply the per-hour bonus by 2 and the hourly wage by 2 and then add those products. $2.50 per-hour bonus x 2 = $5 $12 hourly wage x 2 = $24 Employee's double overtime pay rate = $29 (the regular rate of pay is $14.50) Step 4: Multiply the employee's regular overtime pay rate by the number of regular overtime hours. Do the same for the double overtime rate and hours. $21.75 x 10 regular overtime hours = $217.50 in regular overtime owed $29 x 1 double overtime hours = $29 Step 5: Calculate total compensation. RESULT: $480 in hourly wages for hours 1-40 ($12 x 40 hours) + $100 bonus + $217.50 in regular overtime compensation + $29 in double overtime compensation = $826.50 in total compensation |
Conclusion:
Review your pay practices to ensure that you are calculating and paying overtime in accordance with state and federal rules.