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 How to Calculate Daily and Weekly Overtime in California

 

Jan 1, 2014
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In general, California overtime provisions require that all nonexempt employees (including domestic wokers) receive overtime pay at a rate of 1.5 times their regular rate of pay for all hours worked in excess of eight per day and over 40 per week. This rule applies to all hourly nonexempt employees, including those who are paid on a salary basis. However, for the purpose of computing the overtime rate of pay for a full-time salaried nonexempt employee, the employee’s regular hourly rate must be 1/40th of the employee’s weekly salary. The payment of a fixed salary to a nonexempt employee must be provide compensation only for the employees regular, non-overtime hours, notwithstanding any private agreement to the contrary.

However, the overtime law has a number of exemptions. An “exemption” means that the overtime law does not apply to a particular classification of employees. Any employee who does not meet the requirements of a specific exemption is regarded to be nonexempt. The overtime law also has a number of exceptions. An “exception” means that overtime is paid to a certain classification of employees on a basis that differs from that stated above.

This how-to-guide deals only with steps to comply with California’s general overtime provisions. It is not meant to be nor should it be construed as legal advice, and employers should seek the guidance of independent legal counsel for further advice.

Step 1: Determine Your Workdays and Workweeks

Workday

Because nonexempt employees are entitled to overtime pay if they work more than eight hours in a workday, California employers should establish clear “workdays” to calculate overtime pay accurately.

Under California law, a workday is defined as any consecutive 24-hour period starting at the same time each calendar day. The workday may begin at any time of day. Different workdays may be established for different classes of employees. If an employer does not establish a workday starting time, the workday is considered to last from 12:01 a.m. to midnight.

Daily overtime is due based on the hours worked in any given workday, and averaging hours over two or more workdays is not allowed. Once an employer establishes a workday, it must remain consistent and unchanged unless there is a legitimate business reason for changing it.

Workweek

Given that nonexempt employees are entitled to overtime pay if they work more than 40 hours in a workweek, employers should establish clear “workweeks” to calculate overtime pay accurately.

Under California law, a workweek is any seven consecutive days, starting with the same calendar day each week beginning at any hour on any day, so long as it is fixed and regularly occurring. A workweek is a fixed and regularly recurring period of 168 hours, or seven consecutive 24-hour periods. An employer may establish different workweeks for different employees, but once an employee’s workweek is established, it remains fixed regardless of his or her working schedule. An employee’s workweek may be changed only if the change is intended to be permanent and is not designed to evade the employer’s overtime obligation.

Step 2: Count the Number of Hours the Employee Worked During each Workday and Workweek

Once you have established your workday and workweek schedules, you can accurately calculate overtime pay for your employees by determining how many hours they have worked in each workday and workweek.

Below is an example of an employee’s hours during one workweek:

Sun

Mon

Tues

Wed

Thurs

Fri

Sat

Total Hours for Week

0

8 hrs

8 hrs

6 hrs

8 hrs

10 hrs

0

40

Step 3: Identify the Hours for Overtime Pay and the Rate for Those Hours

Under California law, nonexempt employees must be paid as follows:

  • One and one-half times the employee’s regular rate of pay for all hours worked in excess of eight hours up to and including 12 hours in any workday, and for the first eight hours worked on the seventh consecutive day of work in a workweek.
  • Double the employee’s regular rate of pay for all hours worked in excess of 12 hours in any workday and for all hours worked in excess of eight on the seventh consecutive day of work in a workweek.

There are many variations on overtime pay. The examples below are just a few of the most common.

Example 1

Sun

Mon

Tues

Wed

Thurs

Fri

Sat

Total Hours for Week

0

8 hrs

8 hrs

6 hrs

8 hrs

10 hrs

0

40

In this example, the employee worked five days within a Sunday-to-Saturday workweek by working three eight-hour workdays, one six-hour workday and one 10-hour workday for a total of 40 hours in the workweek. Because the employee worked one 10-hour workday, he or she is entitled to two hours of overtime pay at one and one-half times his or her regular rate of pay. Note that even though the employee did not work more than 40 hours in the workweek, the employee is still entitled to overtime based on workday overtime rules.

Example 2

Sun

Mon

Tues

Wed

Thurs

Fri

Sat

Total Hours for Week

0

4 hrs

13 hrs

6 hrs

6 hrs

5 hrs

0

34

In this example, the employee worked five days within a Sunday-to-Saturday workweek for a total of 34 hours. On Tuesday, the employee worked a 13-hour workday. In this case, the employee is entitled to overtime pay at one and a half times his or her regular rate of pay for four hours, plus overtime pay at double his or her regular rate of pay for the one hour worked over 12 in the day.

Example 3

Sun

Mon

Tues

Wed

Thurs

Fri

Sat

Total Hours for Week

4 hrs

6 hrs

6 hrs

6 hrs

6 hrs

6 hrs

6 hrs

40

In this example, the employee worked seven days within a Sunday-to-Saturday workweek by working six six-hour days and one four-hour day. The employee did not exceed eight hours in a single workday, nor did the employee exceed 40 hours in the established workweek. However, the employee did work seven consecutive days within the workweek. Therefore, the employee is entitled to overtime at one and one-half times his or her regular rate of pay for the six hours worked on Saturday, which was the seventh consecutive workday in the workweek. If the employee had worked more than eight hours on Saturday, the overtime rate would have been double the regular rate of pay for the hours worked over eight.

Example 4

Sun

Mon

Tues

Wed

Thurs

Fri

Sat

Total Hours for Week

0

10 hrs

9 hrs

10 hrs

10 hrs

7 hrs

0

46

Wage Rates

Straight Time

8 hrs

8 hrs

8 hrs

8 hrs

8 hrs

0

40

1.5x

2

1

2

2

0

0

7

2x

0

0

0

0

0

0

0

In this example (commonly referred to as overtime pyramiding), the employee worked five days within a Sunday-to-Saturday workweek by working three 10-hour workdays, one nine-hour workday, and one eight-hour workday for a total of 46 hours in the workweek. As in the previous examples, the employee is paid overtime for hours worked over eight in a single workday (i.e., two hours overtime for each 10-hour day and one hour overtime for the nine-hour day). Note that the employee exceeds a 40 hour workweek on Friday. However, the employee has already been paid overtime for Monday, Tuesday, Wednesday and Thursday, and this overtime does not count toward the 40-hour workweek overtime requirement, because the employee was already paid overtime for those hours. Once an employee is paid overtime for hours over eight in a workday, those overtime hours do not count toward the weekly 40-hour limit.

Step 4: Determine the Regular Rate of Pay for the Employee

Once you have determined how many hours are overtime hours at either one and a half time or two times an employee’s regular rate of pay, you will need to determine the employee’s regular rate of pay. Under California law, overtime pay is based on the employee’s regular rate of pay.

The following are examples of how to calculate the regular rate of pay:

Hourly nonexempt employees

For hourly workers, the regular rate of pay is the amount earned for each hour worked, plus any nondiscretionary bonuses and commissions, divided by the total number of actual hours worked.

Example 1. If the employee is paid solely on an hourly basis, that amount is the regular rate of pay. For example, if an employee earns $10 per hour, overtime pay at time and a half would be $15, and at double time would be $20.

Example 2. If the employee is paid two or more rates by the same employer during the workweek, the regular rate is the weighted average, which is determined by dividing the employee’s total straight-time earnings for the workweek, including earnings during overtime hours, by the total hours worked during the workweek, including the overtime hours.

For example, if an employee works 32 hours at $9.00 an hour and 10 hours during the same workweek at $7.00 an hour, the weighted average (and thus the regular rate for that workweek) is $8.52. This amount is calculated by adding the employee’s $358 straight-time pay for the workweek ((32 hours x $9.00/hour) + (10 hours x $7.00/hour) = $358) and dividing it by the 42 hours the employee worked. The overtime premium is $4.26 for time and a half ($8.52 + $4.26 = $12.78 per overtime hour).

Piece-rate or commission employees

If the employee is paid by the piece or commission, one of the following methods may be used to determine the regular rate of pay for purposes of computing overtime:

  • The piece or commission rate is used as the regular rate, and the employee is paid one and one-half this rate for production during the first four overtime hours in a workday, and double time for all hours worked beyond 12 in a workday.
  • Divide the employee’s total earnings for the workweek by the total hours worked during the workweek. For each overtime hour worked, the employee is entitled to an additional one-half the regular rate for hours requiring time and one-half, and to the full rate for hours requiring double time.
  • A group rate for piece workers is an acceptable method for computing the regular rate of pay. In using this method, the total number of pieces produced by the group is divided by the number of people in the group, with each person being paid accordingly. The regular rate for each worker is determined by dividing the pay received by the number of hours worked.

Salaried nonexempt employees

Existing law provides that for the purpose of computing the overtime rate of pay for a full-time salaried nonexempt employee, the employee’s regular hourly rate must equal 1/40th of the employee’s regular weekly salary. Additionally, the payment of a fixed salary to a nonexempt employee must provide compensation only for the employees regular, non-overtime hours, notwithstanding any private agreement to the contrary. If the nonexempt employee is paid a salary, the employees hourly rate must first be determined by dividing the employee’s weekly salary by 40 hours.

To calculate the hourly rate for a nonexempt employee paid on a fixed weekly salary:

  • Multiply the monthly remuneration by 12 (months) to obtain the annual salary.
  • Divide the annual salary by 52 (weeks) to obtain the weekly salary.
  • Divide the weekly salary by the number of legal maximum regular hours (40) to obtain the regular hourly rate.

Source:California Division of Labor Standards Enforcement (DLSE) website

SHRM Toolkit:Complying with California Overtime and Wage Payment Law

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