How to Calculate Overtime in California

Overtime pay in California operates under a distinct framework, often providing more extensive protections and compensation than federal standards. Understanding these specific regulations is essential for employers to ensure compliance and for employees to verify accurate compensation. Accurate calculation of overtime wages is important, as missteps can lead to significant financial liabilities for businesses and underpayment for workers.

Identifying California Overtime Hours

Overtime hours in California accrue under specific conditions, moving beyond the standard 40-hour workweek. An employee earns overtime pay for all hours worked beyond eight in a single workday. This daily threshold ensures compensation for extended daily shifts.

Hours worked exceeding 40 within a workweek also qualify for overtime compensation. This weekly threshold works in conjunction with the daily rule, meaning an employee can earn overtime based on either daily or weekly hours, but not for the same hours twice. For example, if an employee works 10 hours in a day, the two daily overtime hours count towards the weekly total but are already compensated at the overtime rate.

The seventh consecutive day of work in a workweek is also considered overtime. All hours worked on this day provide additional compensation for employees who work extended periods without a day off.

Time spent on non-work activities, such as bona fide meal periods or rest breaks where an employee is relieved of all duty, does not count towards hours worked for overtime calculation. However, if an employee is required to perform any work duties during these times, or if the break is interrupted, that time must be counted as hours worked and could contribute to overtime.

Determining the Regular Rate of Pay

Calculating overtime accurately depends on establishing the correct “regular rate of pay,” which is not always simply an employee’s standard hourly wage. This rate must encompass nearly all forms of compensation received by an employee for their work during a workweek. Hourly wages serve as the foundation, but other payments must be factored into this calculation.

Non-discretionary bonuses, such as those tied to production goals, attendance, or quality of work, are included in the regular rate. Commissions, which are payments based on sales or performance, must be incorporated into the regular rate for the workweek in which they are earned.

Shift differentials and on-call pay, when an employee’s time is restricted, also contribute to the regular rate. The value of employer-provided lodging may be included. To calculate the regular rate when these additional forms of compensation are present, the total sum of all includable earnings for the workweek is divided by the total number of hours the employee actually worked during that same workweek.

Some payments are specifically excluded from the regular rate calculation. Discretionary bonuses, where the employer has complete discretion regarding payment and amount, are not included. Gifts, payments for bona fide expenses incurred by the employee on behalf of the employer, and payments for vacation, holiday, or illness are also excluded.

Performing Overtime Calculations

Once the overtime hours and the regular rate of pay are determined, the next step involves applying the correct multipliers to calculate the overtime wages owed. California law specifies distinct rates for different types of overtime hours. The standard overtime rate is one and one-half times (1.5x) the employee’s regular rate of pay for all hours worked over eight in a workday or over 40 in a workweek.

California imposes a double-time rate for certain extended work periods. This rate is twice (2x) the employee’s regular rate of pay. Double-time applies to all hours worked beyond 12 in a single workday. It also applies to all hours worked over eight on the seventh consecutive day of work in a workweek.

For an employee earning $20 per hour: 10 hours in a day means the first eight hours are paid at $20, and the remaining two hours at $30 ($20 x 1.5). If working 14 hours, hours nine through twelve are at $30, and hours thirteen and fourteen are at $40 ($20 x 2).

When calculating weekly overtime, if an employee works 45 hours in a week with no daily overtime, the first 40 hours are paid at the regular rate, and the five hours over 40 are paid at 1.5 times the regular rate. Hours already compensated at an overtime rate under the daily rule are not counted again for weekly overtime calculation. For instance, if an employee works 45 hours in a week, with 5 hours of daily overtime, those hours fulfill part of the 40-hour requirement and are not counted again for weekly overtime.

Addressing Specific Overtime Situations

Specific employment arrangements and roles can alter how overtime is calculated. Alternative workweek schedules allow employers to establish a regular workday of up to 10 hours within a 40-hour workweek without triggering daily overtime, typically in a 4/10 schedule. Overtime under these schedules applies to hours worked beyond the agreed-upon regular workday or beyond 40 hours in the workweek. For instance, in a 4/10 schedule, hours worked over 10 in a day or over 40 in the week, or on a non-scheduled workday, qualify for overtime.

Certain employees are classified as “exempt” from overtime regulations, meaning they are not entitled to overtime pay regardless of the hours worked. These exemptions apply to executive, administrative, and professional employees who meet specific salary and duties tests. To qualify, an employee must be paid a salary above a specified threshold, which is currently at least two times the state minimum wage for full-time employment, and primarily perform duties that are intellectual, managerial, or creative in nature.

The treatment of on-call time and travel time for overtime purposes depends on the specific circumstances. On-call time is compensable as hours worked if the employee is required to remain on the employer’s premises or is so restricted that they cannot engage in personal activities. If an employee is merely required to carry a pager and is free to engage in personal pursuits, that time may not be compensable.

Travel time is considered hours worked if it occurs during the employee’s regular work hours, even on non-workdays, or if the employee is required to travel out of town on a special assignment. Commuting time from home to a fixed work site is not compensable. However, if an employee is required to report to a central location and then travel to a job site, the travel from the central location to the job site is considered hours worked.