Avoid Common Wage Theft Fines with Proper Overtime Calculation
California enforcement agencies continue to target employers who commit “wage theft.” What is wage theft you ask? Generally, “wage theft” is a phrase used to refer to infractions of the California Labor Code involving the payment of wages to workers (i.e. failure to pay overtime, minimum wage, all hours worked etc). Employers found to be committing wage theft are not only required to pay any unpaid wages and/or overtime due, but they are also required to pay liquidated damages, waiting time penalties and civil penalties. These fines add up quickly, and ultimately end up costing employers thousands, if not millions of dollars!
The miscalculation of overtime is one of the most common wage theft violations employers are faced with. There are several important rules that must be followed when calculating overtime pay in California, and enforcement agencies will certainly not accept an employer’s “But, we didn’t know” excuse if they are found to have violated the overtime rules.
Are you confident you are following all the rules, or could you be at risk? Find out with this quick review of California’s overtime requirements:
When does an employee qualify for overtime?
- Employees are to paid overtime at a rate of 1.5 times their normal rate of pay when they work more than 8 hours in a workday, more than 40 hours in a workweek, or work on their seventh consecutive day of work.
- Employees are to paid double-time (2 times their normal rate of pay) when they work more than 12 hours in a workday or work more than 8 hours on their seventh consecutive day of work.
What constitutes a workday or a work week?
- A workday is 24 hours long. It can start at any point in the day, but all workdays should start and end at the same time (this need not correspond with the start of an employee’s shift).
- A workweek is seven consecutive 24- hour periods, which should start and end on the same day and time each week.
What if an employee receives two different rates of pay during their 40 hour workweek?
- Their overtime is calculated using a weighted average of the two rates of pay, which is determined by dividing your total earnings for the workweek, including earnings during overtime hours, by the total hours worked during the workweek, including the overtime hours.
For example, if you work 32 hours at $11.00 an hour and 10 hours during the same workweek at $9.00 an hour, your weighted average (and thus the regular rate for that workweek) is $10.52. This is calculated by adding your $442 straight time pay for the workweek [(32hours x $11.00/hour) + (10 hours x $9.00/hour) = $442] and dividing it by the 42 hours you worked.
If an employee takes a vacation/sick day or receives holiday pay, are those hours counted towards their overtime calculation?
- No, only hours that the employee physically works are counted. Vacation, sick or other non-working hours received by the employee are to be paid at straight time and are not to be considered hours worked.
If an employee works unauthorized overtime is the employer obligated to pay for it?
- Yes, California law requires that employers pay overtime, whether authorized or not.
Does overtime need to be considered when giving an employee a bonus?
- This depends. Discretionary bonuses (given at Christmas or other times of the year that are not tied to hours worked or performance) need not be considered when calculating overtime, but non-discretionary bonuses (given based on the number of hours that have been worked and/or the quality of the work that an employee has done) do need to be considered. This can get complicated! We strongly advise that you seek our help or otherwise on this if you are unsure.
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