California's New Overtime Law

California's New Overtime Law

By Jeff McClure

The California Legislature’s passage of the "Eight Hour Day Restoration and Workplace Flexibility Act of 1999" has dramatically changed the State’s overtime compensation laws. Signed by Governor Davis on July 20, 1999, the Act went into effect for most employers on January 1, 2000. The following is a summary of the main points of the Act.

Overtime Must Be Paid For Hours Worked In Excess Of Eight Hours Per Day

The Act’s most significant attribute is the restoration of the daily overtime requirement. Federal law, and the vast majority of States, only require that overtime be paid for hours worked in excess of 40 per week. Effective January 1, 2000, however, California requires that overtime be paid after 8 hours work in a work day and after 40 hours work in a work week.

The new overtime statutes are found at Labor Code Sections 510 through 517.

Click these links to read each of the Industrial Welfare Commission's new Wage Orders and the Official Summary for Wage Orders 1-15.

Under the Act, employers must once again pay time and one half overtime for all hours worked in excess of eight per day. If an employee works in excess of twelve hours per day, the employee must be paid two times his/her regular rate of pay for all hours worked in excess of twelve. These daily overtime requirements must be met regardless of the total number of hours worked during the week.

The Act also contains new overtime pay requirements for employees who work seven consecutive days during the work week. The Act requires that an employee be paid one and a half times his/her regular rate of pay for the first eight hours worked on the seventh day of work in a work week, and two times his/her regular rate of pay for all hours worked in excess of eight on the seventh day. These seventh day pay requirements apply, irrespective of the amount of time the employee has worked during the preceding six days.

Alternative Work Week Options

As initially proposed, the Act did not allow employees and employers to voluntarily choose an alternative work schedule, such as a 4 day/10 hour per day work schedule. While the Act was working its way through the Legislature, however, considerable opposition was voiced from employers and employees alike. In response to this criticism, the Act was amended to provide some flexibility for alternative work schedules, although it is not as much as most employers and many employees would have liked.

Now, the Act provides that an employer can adopt an alternative work schedule, of up to 10 hours per day but no more than 40 hours per week, if the schedule is approved by at least two thirds of the affected employees in a secret ballot election. A written proposal describing the alternative work schedule must be submitted to the affected employees prior to the election.

Once the alternative schedule is established, employers must be aware that they will still incur overtime liability for hours worked in excess of those set forth in the alternative work week schedule. Thus, an employee must be paid one and half times his/her regular rate of pay for each hour he/she works in excess of the hours regularly scheduled under the alternative work week. If an employee’s work day extends beyond 12 hours on a particular day, the time worked after 12 hours must be paid at two times the employee’s regular rate of pay. For example, if an employee working on a nine hour per day alternative work week schedule works 14 hours one day, he/she is entitled to one and half times his/her regular rate of pay for the tenth, eleventh and twelfth hours of work and two times his/her regular rate of pay for the thirteenth and fourteenth hours worked.

Employers are also required to accommodate employees who cannot work the alternative schedule. If an employee votes in a work week election, but is unable to work the approved alternative schedule, the employer has a duty to make a reasonable effort to find a mutually agreeable work schedule for that employee.

The Act also addresses employees who were, as of July 1, 1999, working between eight to ten hours per day, and were doing so because they had requested or volunteered to work such schedule. An employer can continue to utilize that schedule if the employer has a written request from an employee to continue working that schedule after the Act becomes effective.

This section of the Act also addresses workweek elections that occurred before 1998. Prior to 1998, employers were permitted to set alternative work schedules if they followed secret ballot election procedures similar to those required by the Act. Many employers still have pre-1998 alternative work week schedules in effect. Under the Act, any pre-1998 alternative work week elections are still valid if the prior elections were (1) secret ballot elections, (2) approved by two-thirds of the affected employees, and (3) the approved work day does not exceed ten hours. If an employer established an alternative workweek under those conditions prior to 1998, and has continued to operate under that schedule, the employer can continue to utilize that schedule without conducting a new election.

Finally, there is an important procedural requirement regarding secret ballot elections -- the results of the secret ballot election must be sent by the employer to the Division of Labor Statistics and Research within 30 days of the election.

Make-Up Work Time

The make-up work time provision is one of the more interesting aspects of the Act. This exception to the normal daily overtime rules provides that an employer does not have to pay overtime wages to an employee who misses some work due to a personal obligation by working additional hours on another day during the same work week.

However, the make-up time exception only applies if the employee submits a written request to work extra hours on another day during the same week in order to make up that time. The employer then has the sole discretion whether or not to grant the request. Make-up work time does not have to be paid at the overtime rate, so long as it does not result in the employee working in excess of 11 hours in a given work day. Hours worked in excess on eleven hours must be paid at the overtime rate.

Keep in mind that the make-up time must be worked in the same week that the employee lost the work time. Thus, if an employee is forced to miss work late in the week, he/she may not be able to make up all of the work time.

Employers must beware, however, that the Act forbids employers from encouraging or "otherwise soliciting" employees to take advantage of the make-up work option. As a result, an employer may be hesitant to let an employee know that he/she has the option to make-up lost work hours. The Act does not prevent an employer from notifying employees of their rights in this respect, however. Thus, employers may choose to distribute a written policy or memo advising employees of their right to request make-up time. Any such policy should include a disclaimer stating that the policy is not a solicitation for employees to use make-up time, but is only a means to let the employee know that he/she has this option if they are ever forced to miss work. In addition, the employer could provide written forms for employees to use when requesting make-up time. Again, a disclaimer should be included on the body of the form.

These measures should be sufficient to provide employees notice of the make-up work time option without subjecting the employer to an improper solicitation allegation.

Overtime Exempt Employees

Pre-1998 regulations provide that certain administrative, executive, or professional employees are exempt from coverage of the overtime laws (i.e., they are not entitled to overtime pay), provided that at least 50% of their working time was spent performing work which is primarily intellectual, managerial or creative, and requires the exercise of discretion and independent judgment. Under this test, many supervisors and managers were exempt from overtime.

Under the Act, the Legislature has directed the Industrial Welfare Commission to review the current regulations and to enact new regulations setting forth requirements for the executive, administrative, and professional overtime exemption. The Industrial Welfare Commission has until July 1, 2000 to finalize these new regulations.

Meal Periods

The new legislation also addresses employee meal periods, but does not significantly alter an employer’s obligations in this regard. Prior to the enactment of the new law, the Industrial Welfare Commission’s regulations required a thirty-minute unpaid meal period if an employee worked five or more hours. The only exception was if the employee’s worked not more than six hours and both the employer and the employee agreed to waive the meal period. Another thirty minute unpaid meal period is required if an employee works in excess of ten hours. As with the first meal period, however, a second meal period is not required if the employee does not work more than 12 hours and both the employer and employee agree to waive the meal period. The new law codifies this rule.

Conclusion

The changes to California’s overtime laws are significant. The new laws went into effect for most industries on January 1, 2000.

For the Labor Commissioner's legal counsel very comprehensive memo dealing with the new overtime laws, click here.

Get the Industrial Welfare Commission's new Wage Orders 2001 here.

If you have any questions regarding the new overtime laws, employee handbooks or employment policies, please direct them to the author at jeff @ laborcounsel.com.

The information contained in this article is designed to provide accurate and authoritative information in regard to the subject matter. It is not intended as legal advice. No action should be taken in reliance on this information without first consulting our offices or your attorney.