Talk to any employment lawyer and it is an everyday occurrence, employers conning their employees out of their wages by reinforcing myths about California overtime law. These unlawful acts are often perpetrated by supervisors exploiting vulnerable workers who are already struggling to make ends meet. A recent a survey conducted by the Economic Policy Institute found that employers in the state of California had cheated their workers out of more than eight billion dollars in wages in the 2015 calendar year. Unfortunately it isn’t just smaller businesses engaged in these bad acts, many Fortune 500 companies also have been forced to settle claims in recent years.
The Federal Labor Standards Act (FLSA for short) and California state law both set forth the law of the land for mandatory overtime. California, however provides the most protective standards. These wage and hour laws have been part of California’s long standing history and tradition of recognizing that employer and employee do not deal on an equal footing. The California Supreme Court in Gentry v. Superior Court for example has stressed the importance of these labor laws by stating that they “serve the important public policy goal of protecting employees in relatively weak bargaining positions against the evil of ‘overwork.” So what do you need to do to protect yourself and ensure that your boss doesn’t swindle you out of your hard earned dollars? Read this guide to find out.
- What is Overtime?
- Am I Exempt From Receiving Overtime?
- What if I am part of a Union?
- Overtime on Weekends or Holidays?
- Calculating Overtime Owed
- Remedies For Violations
- Can I Request My Payroll Records?
- Statute of Limitations
What is Overtime?
In California, workers are entitled to overtime compensation for work they perform in excess of maximum hours, unless they fall into one of the narrowly defined exemptions. Nonexempt employees should be paid no less than one and one-half times (1.5X) their regular rate of pay for any work performed:
- In excess of 8 hours in any one workday;
- In excess of 40 hours in one work week;
- The first eight hours performed on the seventh consecutive day of work in one workweek.
Nonexempt workers must be paid double (2X) their regular rate of pay for work performed:
- In excess of twelve hours in one workday;
- In excess of eight hours on the seventh consecutive day of work in one workweek;
In addition, other specific rules exist for certain industries that are set by the Industrial Welfare Commission (“IWC”) in its Wage Orders. For example, Wage Order 14-2001 defines overtime for agricultural workers as work performed in excess of 10 hours (instead of 8) in a workday, more than 6 days in a workweek, and during the first 8 hours on the seventh consecutive day of work in any workweek.
Although there is overlap, the federal definition overtime is much narrower and therefore provides less protection. More specifically it states that work performed by a nonexempt employee in excess of 40 hours in one workweek must be paid at one and one-half times (1.5X) their regular rate of pay (exactly the same as California). The FLSA does not allow: daily accrual, any premiums at double the regular rate of pay, or accrual on the seventh consecutive day of work.
California employers are subject to whichever law is most protective of employees. Additionally, as an added measure of protection, Labor Code 1194, states that agreements provided by employers waiving overtime, even when voluntarily signed by an employee are unenforceable.
Am I Exempt From Receiving Overtime?
Although not all employees are entitled to overtime, many workers are under the misconception that just because they are salaried they are not entitled to overtime. This is simply not true. There is no hard and fast rule that categorically exempts salaried employees from receiving premium pay. Instead, a series of tests should be applied on a case by case basis to determine if a person is truly exempt. Below is a list of workers that are exempt.
Executive, Administrative, and Professional Employees
Pursuant to the IWC Wage Orders and Labor Code section 510 & 511, executive, administrative, and professional workers are exempt from overtime if:
1.) They are paid a monthly salary equivalent to no less than twice California’s minimum wage (or $3,640/month for 2017) for full time employment;
2.) The nature of their work is executive, administrative, or professional;
3.) They have primary duties that involves that type of exempt work; and
4.) They discharge those primary duties by regularly exercising independent judgment and discretion.
It is important to note that the status of an employee’s exemption is determined by that person’s salary and duties, not by fancy titles or job descriptions. Further, it is also not determined by an agreement between the employer and the employee that characterizes the employee as exempt.
Computer Programmer Exemption
The exemption also applies to employees in the computer software industry who are primarily engaged in intellectual or creative work that requires the exercise of discretion and independent judgment. (Lab C §515.5.) For the exemption to apply, the computer professional must be primarily engaged in one of the following duties (Lab C §515.5(a)(2)):
• The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications;
• The design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; or
• The documentation, testing, creation, or modification of computer programs related to the design of software or hardware for computer operating systems.
In addition, the employee’s hourly wage must be no less than $43.25 ($88,231.36) for full time employment, and the computer professional is required to be highly skilled and proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, or software engineering.
Outsides salespersons are also exempt from overtime. These are people who are eighteen years old or older who customarily and regularly spend more than 50% of their working time away from the employer’s place of business selling tangible or intangible goods or obtaining orders, contracts for products, services, or use of facilities. An example of an outside Salesperson is someone who goes door to door selling solar panels. (Wage Order Nos. 1–2001—16–2001, §1 (8 Cal Code Regs §§11010–11160, §1).)
Commissioned Sales Employees
Certain commissioned sales persons are also exempt when (1) their earnings exceed one and one half times the California minimum wage ($15.75 in 2017), (2) more than half of their compensation is derived from commissions on sales of goods and services, and (3) the person works in the mercantile industry (See IWC Wage Order 7-2001) or works in a professional, technical, clerical, mechanical or similar occupation. (See IWC Wage Order 4-2001.)
What if I am part of a Union?
The rules above do not apply to workers that are covered by a collective bargaining agreement (CBA) that already provides for:
• Premium rates for all overtime worked; and
• The wages, hours of work, and working conditions of the union workers;
• A regular hourly rate of pay of not less than thirty percent more than the state minimum wage rate.
In such a case, the CBA rule will govern.
Overtime on Weekends or Holidays?
No, you are not entitled to premium compensation solely because you worked on a weekend or a holiday. The court held in Advanced-Tech Sec. Servs., Inc. v Superior Court (2008) 163 CA4th 700, the court held that an employee who already received premium pay at one and one-half times the employee’s regular rate for working on a holiday was not entitled to any additional overtime. The court rejected the employee’s holiday premium rate should be transformed into the employee’s regular rate for purposes of calculating overtime.
Calculating Overtime Owed
Calculating the amount of overtime that your employer has shortchanged you on can be somewhat confusing. The explanations below will focus on California state law to avoid reader confusion and also because generally they provide better protections than the FLSA. The formula, however, is pretty simple: Amount of overtime compensation owed=(regular rate of pay) x (applicable rate of overtime i.e. 1.5x or 2x) x (number of overtime hours worked).
Determining Your Regular Rate Of Pay
The regular rate of pay is an employee’s hourly rate. It includes all remunerations paid to an employee, except matters specifically excluded. If bonuses are provided in addition to the hourly rate, those bonuses must be divided by the number of hours worked in the week and added to the hourly rate so that the regular rate can be determined. Example: Steve gets paid $15 an hour as a clerk a grocery store. He gets a $100 performance bonus for the work he performed during a particular week. That specific week he worked 40 hours. Therefore, Steve’s regular rate of pay is: $100/40 hours=$2.5 per hour. $15+$2.5=$17.5 per hour.
Calculating the regular rate for salaried nonexempt employees is much more complex. It is determined by dividing the weekly salary of an employee by the number hours the salary was intended to cover (up to maximum 40 hours). Example: Christina gets an annual salary of $60,000 a year. To calculate her regular rate, first you take her total annual salary and divide it by the total number of weeks in a year (hint there are 52 weeks in a year.) $60,000/52 weeks=$1,153.85 salary per week. Then you divide that number by the agreed upon number of hours your salary is intended to compensate you per week (not to exceed 40 hours). Here, Christina typically works 50 hours a week, so we can assume the agreed upon number of hours per week is 40. $1,153.85/40 hours= $28.85 regular rate per hour.
Calculating the regular rate for work performed by a pieceworker is relative simple. Working on a Piece-rate basis means that the employee is paid a fixed amount for each unit produced or outcome performed regardless of the actual time. Here the regular rate is calculated by taking the total sum of all earnings in a week and dividing it by the number hours of work performed.
Definition of Workweek & Workday
California state law and Federal law provide that nonexempt employees are entitled to overtime pay for work performed in excess of 40 hours in one “workweek.” But what exactly is the definition of a “workweek”? Usually the law will defer to the employer, but if an employer has not predesignated the workweek, the Department of Labor Standards Enforcement treats workweeks as beginning at midnight on Sunday and ending on Saturday. (Lab C §500(b); 2002 DLSE Enforcement Policies and Interpretation Manual.)
“Workday” is defined by by California Labor Code section 500(b) as any consecutive 24-hour period commencing at the same time each calendar day.
Determining Hours Worked
Just because an employee was not scheduled to work doesn’t mean he or she didn’t actually work for purposes of computing overtime hours. The IWC wage orders define “hours worked” as “the time during which an employee is subject to the control of the employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so.” (8 Cal.C.Regs. § 11010 et seq.)
Off The Clock Work
Employers must compensate employees for “off the clock” work, if the employer knew or should have known that employees were working those hours. “Off the clock work” is defined as time worked before punching in or punching out on a time card.
Examples of Overtime Calculations
Example 1 – (Computed Daily): Sally’s regular rate of pay is $10 an hour. She works 9 hours in one day. She is owed one hour of overtime at $15. (1 hour) x (1.5 x $10) = $15
Example 2 – (Computed Weekly): Mike’s regular rate of pay is $12 an hour. He works 8 hours a day for six consecutive days during the work week. He is owed eight hours of overtime at $18 an hour or $144.00. (8 hours) x (1.5x$12) = $144.00.
Example 3 – (Seventh Day Premium): Robert works 7 consecutive days in one workweek and his regular rate of pay is $14 an hour. His employer uses a Mon-Sun workweek. He works 5 hours a day Monday through Saturday, then works 10 hours on Sunday. Although he only worked a total of 40 hours during the entire week he is owed overtime. He is one and one-half times his regular rate of pay for the first eight hours of work her performed on Sunday, and double his regular rate of pay for the final 2 hours of work on that same day. He is therefore should have been paid $15 per hour x 1.5= $22.50. $22.50 x 8=$180 for the first eight hours of worked on Sunday, and $15 per hour x 2= $30.00. $30.00 x 2= $60 for the last 2 hours worked on that same day. Therefore, he is owed a total of $240 for all the work he performed on Sunday (his seventh consecutive day of work.)
Example 4 – (Pieceworkers): Jody builds widgets and gets paid a fixed sum per widget built. In one particular week she earns $700. She worked five days, ten hours per day for a total of 50 hours. This is how her premiums should be calculated: $700 ÷ 50 hours = $14 ÷ 2 = $7 (half time premium) x 10 hours of overtime = $70. Therefore, her total earnings for the particular week are $770 ($700 + $70).
Remedies For Violations
Remedies can differ based on whether you bring your claims under the FLSA or California State laws. For example, under 29 USC § 216(b) of the FLSA, an employee who brings an overtime civil lawsuit and provides proper proof, can recover back pay, attorney fees, injunctive relief, and an equal amount of back pay as liquidated damages (double damages). These liquidated damages must be awarded unless the employer proves that it had been acting in good faith and had reasonable belief that its conduct in denying overtime did not violate the FLSA. The court may award a lesser amount in liquidated damages.
Despite the fact that California law provides a broader definition of overtime and additional protections, it does not provide liquidated damages. Instead, under labor code Lab code § 1194 it provides back pay, interest, attorney fees and costs of suit. Potential litigants should therefore calculate damages pursuant to the FLSA and the California statutes prior to make a decision on which one they will proceed under.
Can I Request My Payroll Records?
What few aggrieved workers know is that they can actually request their payroll records from their employer. These records will in turn help them calculate the backpay and provide the necessary evidence they need to prove their claim. Pursuant to California Labor Code section 226 an employer must keep records of wage statements regarding their employees’ hours worked and wages paid, and must upon reasonable oral or written request from a particular current/former employee allow him or her to inspect or copy the records. The employer must comply with the request as soon as practicable, but no later than 21 days after the request. Under the code, if an employer does not comply, the current/former employee is entitled to a $750 penalty from the employer. If you believe that your employer has unlawfully engaged in wage theft, please give us a call for a free legal consultation with an employment attorney and we will make a request to inspect your employer’s records on your behalf. Alternatively, you can request your records directly from your human resources department.
Statute of Limitations
The statute of limitations governing unpaid wages is three years. (CCP §338). Claims for unpaid wages in some cases can also be recovered under California’s Unfair Competition Law (UCL) which provides 4 years. (Bus & P C §17208; Cortez v Purolator Air Filtration Prods. Co. (2000) 23 C4th 163, 173).