California overtime rules and exceptions are more beneficial to employees than corresponding federal regulations.
Not paying required overtime premiums.
For almost all nonexempt private sector California employees who are not covered by collective bargaining agreements, California overtime pay is based primarily on the number of hours worked in a day. However, you must also account for weekly totals when calculating California overtime.
The trickiest part of payroll administration is the calculation of overtime. You should use a step-by-step approach. First, identify those hours that must be paid on an overtime basis, then decide whether you need to pay time-and-one-half or double-time for those hours, then determine the "regular rate" you must use to calculate the overtime pay.
When calculating overtime pay in California, you must use the employee's "regular rate" of pay, not the normal hourly amount. The regular rate is not always simply an employee's normal hourly amount. The regular rate is a term used to mean the employee's actual rate of pay once all hourly earnings plus many other types of compensation are considered, such as commissions, bonuses and piece rates. The regular rate must include nearly all forms of pay received by that employee.
Only hours worked at straight-time apply to the weekly 40-hour limit. This prevents "pyramiding" of overtime, where an employee earns overtime on top of overtime already paid.
Paying a nonexempt employee a salary does not relieve you of your obligation to pay overtime. Nonexempt employees must be paid for all hours worked, including any daily or weekly overtime.
Calculating daily and weekly overtime in California can be quite confusing. Below is an example that shows the proper overtime calculations for one common situation.
The Wage Orders for specific industries contain certain exceptions to the general rules for calculating overtime and premium pay. If you are in one of those industries, familiarizing yourself with the exceptions can help you avoid penalties and may even save you money.
Many California agricultural employers are subject to a series of phased-in overtime changes. Agricultural workers have historically received time and a half only after 10 hours per day but that threshold is being reduced in annual increments until 2025 when they will receive overtime pay on the same basis as workers in most other industries. There is a delay for smaller employers and exceptions for some types of agricultural businesses.
Employees generally have no legal basis on which to refuse to work overtime in California. There are exceptions under certain specific Wage Orders or a company policy or union contract addressing the subject. Employees may also have to be accommodated in terms of refusing overtime hours due to disabilities and religious needs. Under some Wage Orders, there are limitations on the actual amount of overtime you may require employees to work.
CalChamber members have access to several tools and services that help those who manage human resources to work through California overtime pay-related issues, including:
Overtime Calculation Worksheet »
Use this form to calculate pay for your nonexempt employees.
Don't make these mistakes that could lead to employee lawsuits.