California Employer’s Guide to Overtime Pay Compliance: Laws, Risks, and How to Avoid Wage Claims
Introduction
California employers must pay overtime wages to eligible employees for all hours worked beyond regular daily or weekly limits. Failure to pay the correct overtime rate—even if the employee agrees to a lower rate—can result in significant liability, penalties, and lawsuits. Labor Code § 1194(a).
Legal Standard: Essential Elements
To prove a nonpayment of overtime claim, the employee must demonstrate:
Work was performed for the employer.
The employee worked overtime hours under state law.
The employer knew or should have known about the overtime hours.
The employee was unpaid or underpaid for those overtime hours.
The amount of overtime pay owed.
California’s overtime law covers hours worked in excess of 8 in a workday, or 40 in a workweek, and applies to most nonexempt employees. Labor Code §§ 510, 515(d); Flowers v. Los Angeles County Metropolitan Transportation Authority, 243 Cal.App.4th 66, 83 (2015).
Overtime Rates and Calculation
The legal overtime rate is generally 1.5 times the regular rate of pay for hours over 8 in a day or 40 in a week, and 2 times the regular rate for hours worked beyond 12 in a day. Bonuses, commissions, and some allowances affect the overtime rate calculation. Alvarado v. Dart Container Corp. of California, 4 Cal.5th 542, 573 (2018).
Exemptions and Employer Knowledge
Certain roles, such as outside salespersons or bona fide executives, are exempt from overtime rules; it’s the employer’s affirmative burden to prove any exemption. Ramirez v. Yosemite Water Co., 20 Cal.4th 785, 794–95 (1999).
Overtime pay is required if the employer knew or should have known about the extra hours worked. Employers cannot avoid liability just because employees did not obtain express approval. Jong v. Kaiser Foundation Health Plan, Inc., 226 Cal.App.4th 391, 395, 399 (2014).
Penalties and Remedies
Employers may be held liable for unpaid overtime, liquidated damages, and civil penalties. Labor Code §§ 1194, 1194.2. Accurate timekeeping and prompt payment in compliance with wage orders are essential.
Practical Guidance for California Employers
Track all hours worked by nonexempt employees, including overtime and “off the clock.”
Review overtime calculations, especially when incentives or bonuses are involved.
Understand and correctly apply relevant exemptions, and retain supporting documentation.
Address overtime claims quickly to reduce exposure to penalties or litigation.
Bottom Line
California law strictly enforces overtime wage requirements for eligible employees; business owners must proactively comply with recordkeeping, pay calculations, and exemption rules to minimize risks.
Citations
Labor Code §§ 1194(a), 1194.2, 510, 515(d), 200; Flowers v. Los Angeles County Metro. Transp. Auth., 243 Cal.App.4th 66, 83 (2015); Alvarado v. Dart Container Corp. of California, 4 Cal.5th 542, 573 (2018); Ramirez v. Yosemite Water Co., 20 Cal.4th 785, 794–95 (1999); Jong v. Kaiser Foundation Health Plan, Inc., 226 Cal.App.4th 391, 395, 399 (2014).
