As an employer, it is important to pay overtime to your eligible employees at the correct rate and at the proper time when overtime hours are worked in order to reduce your liabilities and avoid suit or extra fees. What should you know about California’s overtime laws?

Who Is Eligible To Receive Overtime?

Non-exempt, non-salaried (hourly) employees who work more than 8 hours in a day or 40 hours in a week are required to receive overtime by California overtime provisions. Non-exempt employees who work more than 8, but less than 12, hours in a day will receive compensation at the rate of time and a half. Non-exempt employees who work more than 12 hours in a day will receive compensation at the rate of double time.

Which Employees Are Exempt From Overtime?

Employees are properly classified as exempt from California overtime provisions.  only when they meet at least two general conditions. First, an exempt employee must meet the ‘salary test’ by being paid a set  salary which is more than two times the minimum wage rate (in California, the minimum wage is $9.00 per hour at present time) and which is not subject to deductions for the quality or quantity of work performed.  Second,  exempt employees must  regularly exercise discretion and independent judgement over matters of significant importance while performing their work duties.   If these two basic requirements are met, then employees can qualify as exempt from overtime requirements if they meet additional requirements for Executive employees (who must supervise at least two employees, have the authority to hire and fire and perform tasks related to running a business) or Administrative employees (who must perform office or non-manual work related to management policies or general business operations) or Professional employees (who must be engaged in a learned profession with work requiring knowledge of an advanced type which is predominantly intellectual and varied in character).

Does A Startup Company Pay Overtime?

New startup companies must also adhere to California’s overtime provisions. Employment law in California requires each non-salaried, non-exempt employee who works more than 8 hours a day or 40 hours in a week to be paid time and a half.
The one exception to this is volunteers, who are not held to the same standards as paid employees; however, ‘volunteering’ is allowed only in limited circumstances, for individuals who intend to donate their services to religious, charitable, or similar nonprofit corporations without contemplation of pay and for public service, religious, or humanitarian objectives.

What If I Didn’t Authorize Or Know About The Overtime Worked?

California law requires that an employer pay overtime, even if it is not authorized, and whether or not the employee was asked to work the overtime hours. If an employee was “suffered or permitted” to work overtime, and the employer knew or should have known about it, then overtime pay is due. Time incurred by an employee will qualify as overtime work if the employee is under the control of the employer, or is performing work benefitting the employer, or is not free to engage in their own personal pursuits.

How Is Overtime Paid?

Overtime is paid in cash or cash equivalent, generally in the form of a paycheck. Overtime worked during one pay period should be paid out at the next paycheck. If an employee quits or is laid off or terminated, however, any overtime pay (or any pay or benefits) due must be paid at the time the employee ceases working for the employer (at the end of their last day of work).

Why Should I Pay Overtime?

There is one very good reason to pay overtime to your employees: it is the law. Overtime laws were first developed in the 1930s as a job creation tool, to encourage employers to hire more workers in order to avoid paying overtime rates. Whether you decide to compensate for overtime, or hire more employees to avoid overtime, it is important to adhere to California’s provisions on overtime wages. Not paying overtime according to California’s employment law could cost you in suits, fees, and penalties. For more information about avoiding liabilities pertaining to overtime and other employment laws in California, contact a Goyette & Associates employment law professional.