Chapter 19:
Daily Overtime

Last Updated February 2007


Effective January 1, 2000, the California legislature revamped overtime regulations and reintroduced daily overtime provisions. Overtime pay is regulated by the Fair Labors Standards Act (FLSA) at the federal level and by the California Labor Code (CLC) at the state level. California regulations are codified in 17 Wage Orders. The focus of this chapter is on California law and regulations. Furthermore we seek to explain the permissible methods of limiting or eliminating overtime so that employers can reduce their operating expenses.


Workdays and Workweeks

In understanding how to calculate overtime employers must first understand the difference between a workday, a workweek and a work shift. A "workday" is "any 24-hour period commencing at the same time each calendar day," not the shift that an employee is scheduled to work. Employers can change the starting time of the workday as long as the day has a regular start time. A workday, for example, can start at midnight and end at 11:59 p.m. This is important because an employee who works twelve straight hours but only six on each of two consecutive workdays is not eligible for overtime. If an employee works from 6:00 p.m. to 6:00 a.m. and the workday ends at midnight, then a new workday commences at 12:00 a.m. and the employee is paid six hours for each day without overtime.

How the workweek is defined is equally important. While daily overtime has been revived in California, the federal and state laws still require overtime payments for hours worked over 40 in a workweek. With this in view, the designation of the workweek, which is a "fixed and regularly recurring period of 168 hours, seven consecutive 24-hour periods," will determine whether in any specific case overtime is payable. A workweek can start any day of the week, but will end 168 hours later, for example, Monday - Sunday; Sunday - Saturday etc.

The wage orders define a "shift" to mean "designated hours of work by an employee, with a designated beginning time and quitting time." Because a shift may be less than eight hours, working beyond one's shift does not necessarily invoke overtime. While helpful, this term is not critical in determining whether or not an employee is eligible for overtime payment.

With these terms in mind it is easier to understand the general overtime provisions. Labor Code Section 510 states in relevant part, "Any work in excess of eight hours in one workday and any work in excess of 40 hours 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."

A more important term, however, is what constitutes the "hours worked." This is important because "hours worked" is the basis by which all overtime is calculated. "Hours worked" is defined in Section 2 of the DLSE wage orders as, "... the time which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so." This definition has two parts: the first relates to time the employer has control over the employee and the second pertains to the time the employee is allowed or permitted to work even if the employee was not required to work. A frequent question is whether or not sick, vacation or holiday time is "hours worked."

If you apply the above definition you can see that when an employee has sick, vacation or holiday time off, the employee is not under the control of the employer during such times, and is neither allowed nor permitted to work and, therefore, those hours need not be considered overtime. In a California Supreme Court case, Morillion V. Royal Packing Company, the court ruled that travel time was considered time worked because such time, in this case, was under the control of the employer. In addition, on November 8, 2005, the U.S. Supreme Court ruled that time walking between work stations and locker rooms is compensible. (IB v. Alvarez and Tum v. Barber Foods, Inc.)

Some collective bargaining agreements and some employers' handbooks provide for the inclusion of sick, vacation and holiday time off for the purpose of determining overtime paying overtime for "all" hours, but these provisions are not legally mandated. Accordingly, most employers do not consider sick, vacation or holiday hours not worked, as "hours worked" when calculating overtime.

Another reason that the definition of a workweek is important is because it pertains to the overtime pay that is required on the seventh consecutive day of work in the same workweek. Following the same reasoning as the workday, if an employee works seven consecutive days in the same workweek, then overtime pay is invoked. (See below) If, however, the seven days of work are distributed between two workweeks, then no overtime is required. Each workweek stands on its own for the purpose of determining the overtime liability.


Overtime Triggers

Overtime is payable under the following conditions under California Law:

Time and one half

  • Hours worked over 8 hours in one workday
  • Hours worked over 40 hours in one workweek
  • Hours worked up to the first 8 hours on the 7th consecutive day of work in the same workweek.

Note: Under federal law overtime is payable for all hours worked beyond forty (40) in a workweek. There is no daily overtime provision under federal law.

Double Time

  • Hours worked over 8 hours on the 7th consecutive day of work in the same workweek
  • Hours worked over 12 hours in any workday

Variations from an alternative work week arrangement can also trigger overtime. All hours worked in excess or outside of the regularly scheduled hours must be compensated at a premium rate; the first 8 hours of work are paid at time and one-half, and all hours in excess of 8 are paid at double time. An employer, however, may substitute one day of work for another day of the same length in the shift provided by the alternative work week agreement at the employee's request, without the payment of overtime. Employers are advised to obtain the employee request in writing.


Minimum Wage

On September 12, 2006 the Governor signed AB1835 increasing the minimum wage for the state of California from $6.75 to $7.50, effective January 1,2007 and from $7.50 to $8.00 effective January 1, 2008. This is important for many industries with low wage earners. The minimum wage serves as the starting point in development wage structures for some companies. In addition, as will be explained more below, the minimum wage is the basis for salary test in determining exempt status. October is a good time to review the impact of the increase in overtime for each subsequent year.


Strategies for Reducing your Overtime Liability

California provides three methods of reducing the overtime liability of employers. None of these provisions is new, but each has new elements added.

1. Exemptions

The first strategy is to classify employees as exempt from the overtime regulations. This is not, however, simply a matter of employer prerogative. Employees can be exempted from overtime if they are classified as executive, administrative or professional. Being paid a salary requirement for exempt status under most exemptions. The salary must be equal to two times the state minimum wage. This indexing to the minimum wage is important because each time the minimum wage is increased, some low paid exempt employees may lose their exempt status. With the additional increase of $.75 per hour on January 1, 2007, the new salary threshold requirement for exempt status is $31,200 per year. In addition to this salary requirement, exempt employees must perform exempt-level duties at least 50% of their work time to be properly qualified for an administrative, executive or professional exemption.

On September 16, 2000, the Governor approved a measure (SB 88) to extend exempt status to special categories of nurses and computer professionals. Registered nurses are normally non-exempt for overtime purposes and the new provision allows for the following exceptions: Certified nurse mid-wives, certified nurse anesthetists and certified nurse practitioners who are "primarily engaged in performing duties for which certification is required" are now exempt according to Labor Code §515. This means that a certified nurse practitioner, for example, who is working in labor and delivery is not "primarily engaged" in exempt work and, under those conditions and for those hours worked, would be non-exempt. Any advance practice nurse who is working outside of the certification is performing non-exempt work.

The only exception to this rule would be that such work meets the duties test for executive or administrative exemptions.

Cross reference: For more information on exemptions, see "White Collar" exemptions in this manual.

Hourly paid computer professionals in the software field who are "primarily engaged" in exempt work as specified in §515.5(a) of the Labor Code, are highly skilled, and are paid not less than $36.00 per hour for all hours worked are exempt from premium overtime pay rates.. The Division of Labor Statistics and Research is empowered to adjust this rate annually in October to be effective January 1 of the following year. The amount of increase is equal to "the percentage increase in the California Consumer Price Index for Urban Wage Earners and Clerical Workers." Work performed over 8 hours per day or over 40 hours in a workweek is compensated at the regular hourly rate. Section § 515.5(a)(4) of the California Labor Code permits an employer to pay an annualized full-time salary equivalent of the hourly rate. However, employers must still pay $36.00 for each hour worked in a workweek. It is essential that employers keep track of all hours worked for hourly paid computer professionals in order to assure the proper payment of wages. SB 929 became effective on January 1, 2008. It lowered the hourly rate of pay for a computer professional from $49.77 to $36.00, or the annualized full-time salary equivalent of that rate, provided that all other requirements of the law are met. AB 10, effective September 30, 2008, states that a computer professional may be exempt:: "...if the employee is paid on a salaried basis, the employee earns an annual salary of not less than seventy-five thousand dollars ($75,000) for full-time employment, which is paid at least once a month and in a monthly amount of not less than six thousand two hundred fifty dollars ($6,250)."

* The Division of Labor Statistics and Research shall adjust both the hourly pay rate and the salary level of computer professionals on October 1 of each year to be effective on January 1 of the following year by an amount equal
to the percentage increase in the California Consumer Price Index for Urban Wage Earners and Clerical Workers.

In addition, the former IWC was mandated to review the wages, hours and working conditions of outside salespersons. The commission has decided to leave the definition of outside salespersons unchanged and to leave the status as exempt at this time. (Note: the IWC, Industrial Welfare Commission, was defunded by the legislature effective July 1, 2004. The Division of Labor Standards Enforcement, the DLSE, has taken over its regulatory duties.)


2. Alternative Workweek Schedules

Employers can elect to implement an alternative workweek schedule to reduce its overtime liability as well.

According to Labor Code § 500 (c) an "Alternative workweek schedule" means any regularly scheduled workweek requiring an employee to work more than eight hours in a 24-hour period. In other words if an employer seeks to run a work schedule beyond an eight hour day, an alternative workweek schedule is required to avoid overtime. Special provisions and limitations are established by the labor code to properly set up an alternative workweek agreement. See the wage order for your industry for the relevant details, or section 511 of the CLC.


3. Make-Up Time

An employer may permit an employee to voluntarily make up work time that is lost due to a personal obligation without having the employer having to pay overtime after eight hours in a day. The employee must request the make up time in writing. Make up time has to be completed in the same workweek in which the time was originally lost. The number of hours worked in any day cannot exceed 11 hours and the number of hours worked in the workweek cannot exceed 40 hours. Employers, however, are not required by legislative action to provide make up time. [California Labor Code Section 513]


Liability

Liability for Underpayment: Labor Code Section 558 permits liability in the form of civil penalties for any employer or other person acting on behalf of an employer who is found guilty of underpayment of overtime, or violating any wage and hour provision any provisions regulating hours and days of work. The penalty will be $50 per violation for the first offense and $100 for each subsequent violation, plus any amount incorrectly paid to each affected employee. These penalties are in addition to current criminal penalties and fines already established.


Health Care Industry

Unlike most industries that are restricted to ten-hour shifts, Wage Order (5) permits the health care industry to retain its 12-hour shifts within a forty-hour workweek. This wage order also added the provision that unless there is an emergency, no health care worker can work more than 12 hours in a twenty-four hour period. These rules apply to employees involved in direct patient care and not office workers. In addition, the definition of health care has been expanded to include the care of animals.

Overtime pay for nonexempt employees working beyond the limits described above is a statutory right under California and federal law. This chapter describes some of the statutory provisions for and offers guidance in reducing an employer's overtime liability in California. Failure to pay overtime, however, may trigger statutory penalties or litigation.

[This is a brief summary of key provisions related to overtime and is not intended to provide legal advice. ]

 

 

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