HR Management & Compliance

5 tips for paying overtime in California

Overtime in California can be a complex calculation, not the least of which is because the state laws for calculating overtime differ from federal law. This issue remains a priority because overtime violation complaints are on the rise. –Claims for unpaid overtime and other missed pay obligations are definitely the lawsuit of the day.– Allen Kato told us in a recent CER webinar. So, what can employers do to get it right?

5 Tips for Paying Overtime in California

Kato outlined 5 tips for employers calculating overtime in California:

  1. Watch out for differences between federal and state laws, especially if using a vendor to compute the pay. Paying overtime is considered a non-delegable duty – it’s the responsibility of the employer to ensure it’s correct. Kato explained further: “Your company may be liable even if the fault is on the part of a payroll service that made the mistakes in computing the overtime.”
  2. Count all hours worked in the calculation of the overtime. All hours worked includes –hours that the employee is subject to the control of the company, even if that employee is not actually working.– Kato advised.
  3. Don’t “monkey around” with the workweek choice. The workweek is any consecutive 7-day week. “You can start the workweek on any day in the week, but once you set it, it must remain fixed.” Kato told us. In other words, once the workweek is set, don’t change it (absent a compelling business reason). One note: employers can even have different workweeks for different groups of employees—but don’t do this if it going to be viewed as an attempt to manipulate the system to avoid an overtime obligation.
  4. Do include all appropriate pay in the “regular rate” calculations. Normally the way to calculate the regular rate is to add up all compensation for week and divide by 40 (hours). Be sure to include all compensation in calculating regular rate, including items such as: shift differential pay, piece rate pay, production bonuses, commissions, stipends for being on call, and the fair value of non-cash compensation such as employer-provided meals or lodging.
  5. Don’t forget to think about and properly apply special pay rules such as reporting time, call back pay, meal and rest breaks that are actually worked, and split-shift pay.

The above information is excerpted from the webinar titled “How to Calculate Overtime in California: 24×7 Schedules, Blended Rates, and Other Challenges.” To register for a future webinar, visit CER webinars.

Allen Kato is an attorney in the Employment Practices Group of Fenwick & West LLP in San Francisco. His practice concentrates exclusively on representing management in equal employment opportunity, wage and hour, wrongful termination, privacy, unfair competition, and trade secret matters, and litigating individual and class action lawsuits before courts and agencies.

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