A Guide to California Overtime Laws 2023

When you’re in charge of payroll for a California company, you are responsible for being compliant with California overtime laws.

There are Federal protections for employees, established by the Fair Labor Standards Act (FLSA), that outlines minimum wage and overtime pay rates for employees. California’s overtime laws are similar but tend to be more beneficial to employees than Federal overtime laws.

What are the laws governing overtime wages?

California has additional pay rate and overtime regulations, established by the California Labor Code and the California Industrial Welfare Commission (IWC) Wage Orders. These regulations are enforced by the Division of Labor Standards Enforcement (DLSE).

What is the difference between overtime and FLSA overtime in California?

Under the FLSA, employers are required to pay overtime pay at a rate of 1.5 times a non-exempt employee’s regular pay for any time worked over 40 hours in the week.

In California, this is extended to include paying 1.5 times the regular pay rate for each hour worked over eight hours in a day, for each hour worked over 40 in a workweek, plus the first eight hours worked on the seventh consecutive day of the week. 

Additionally, California employers are required to pay double the regular rate of pay for 12 or more hours worked in a day and for any hours worked over eight on the seventh consecutive day of work.

The FLSA does not require overtime pay for certain agriculture workers, but California overtime law requires overtime pay for any agriculture workers who prepare soil or harvest crops after 10 hours of work and for the first eight hours of the seventh day of consecutive work. Further, double time is required for any hours worked over eight if it’s the seventh consecutive day of work.

What is the new overtime law in California?

California governor Gavin Newsom signed into law SB 1162 in September, 2022, which is an act intended to strengthen pay equity across the state and increase reporting requirements for California employers.

Previously, employers with at least 100 employees were required to provide a pay data report, that characterized employees’ genders, race/ethnicity, and job category, to the EEOC in order to be compliant. SB 1162 extends these reporting requirements to include:

• Employees hired through labor contractors be included in the reporting requirements
• Employers report their mean and median hourly wage data for each combination of gender and race/ethnicity

Employers are required to track job titles and pay rates for each position and submit the mean and median hourly rates by gender and race for:

• Executive or senior-level officials and managers
• First or mid-level officials and managers
• Professionals
• Technicians
• Sales workers
• Administrative support workers
• Craftworkers
• Operatives
• Laborers and helpers
• Service workers

According to the law, the report is to be an overview of a "single pay period of the employer's choice between October 1 and December 31 of the reporting year." These records are to be maintained for the entire time an employee works for the company, as well as three years beyond their employment.

How to calculate overtime in California

California overtime laws apply to most hourly employees and if you’re responsible for managing payroll, you’ll need to understand how to calculate it. 

In some cases, overtime is considered 1.5 times the regular pay of that employee, and double time is twice their regular pay. While there are always exceptions and exemptions, as a general rule, the following are California overtime rules:

What is a workday?

A workday is a 24-hour period that begins and ends at the same time on a calendar day.

What is a workweek? 

A workweek is a period of seven days that begins on the same day each week. A workweek may not correspond to a calendar week, and can be determined by the employer.

Which employees are eligible for overtime wages?

• Employees Must Be Older Than 18 Years
• Employees Must Be Over 16 Years Old And Legally Allowed Work
• Employees Must Be Working In A Non-Executive Role Or Non-Professional Role
  
  

Exempt employees from overtime pay

There are a number of exemptions to the overtime requirements in California. Generally speaking, exempt employees are usually paid a fixed annual salary and fall into one of a few different general categories.

Executive, administrative, and professional employees

Sometimes dubbed the “white collar exemption,” this exemption must meet certain requirements to apply:

1. At least 50 percent of your employment duties include executive, administrative, or professional work.
2. You most often exercise your discretion at work when making decisions.
3. Your salary meets the California minimum requirement (for the year 2023, this amount is $64,480).
   
   

Computer employees

Software and computer professionals are exempt if these criteria apply:

1. Their duties are primarily creative and intellectual, requiring discretion and independent judgment
2. Their primary work consists of one or more of the following:
1. “The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications.
2. “The design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to, user or system design specifications.
3. “The documentation, testing, creation, or modification of computer programs related to the design of software or hardware for computer operating systems.”
3. They are “highly skilled and…proficient in the theoretical and practical application of highly specialized information to computer systems analysis, programming, and software engineering.”
4. They earn at least $53.80 hourly, or $112,065.20 per year paid on a monthly basis (these figures are adjusted annually.

Outside salespeople

According to the California Department of Industrial Relations, outside salespeople are exempt if they are “18 years of age or older, who customarily and regularly works more than half the working time away from the employer's place of business selling tangible or intangible items or obtaining orders or contracts for products, services, or use of facilities.”

Job-specific exceptions

There are some specific jobs that may have special overtime rules. These include:

• Live-in household employees
• Personal attendants
• Camp counselors⁠ 
• Managers of homes for the aged
• Certain providers of 24-hour residential childcare
• Ambulance drivers and attendants; 
• Certain agricultural occupations and the employer’s spouse, children, and parents.⁠

The California Industrial Welfare Commission issued these wage orders, to establish these exceptions, but not all employees with these jobs will qualify. 

When do California mandatory overtime rules apply?

California employers are required to comply with mandatory overtime rules for all non-exempt employees. 

California’s new wage reporting law became effective January 1, 2023 and May 10, 2023 is the deadline for employers to submit their 2022 mean and median pay data reports to the California Department of Civil Rights. Employers must submit their 2023 annual mean and median pay data reports by January 1, 2024.

How employers avoid paying overtime

It is illegal to avoid paying overtime to qualified employees, but some employers do attempt to get away with not paying it in a number of different ways.

1. Employee misclassification

Independent contractors are responsible for their own taxes and are not considered direct employees when working. For this reason, they are not entitled to overtime pay. Some employers may try to classify their employees as a contractor to avoid paying taxes, overtime, benefits, and other perks direct employees are entitled to.

2. Off-the-clock work

Some employers might require employees to continue working despite being clocked out for breaks or meals. 

3. Passing work to exempt employees

Some employers will assign the tasks or duties of a non-exempt employee to exempt employees, thereby robbing the non-exempt employee of hours they could be working and possibly earning overtime, and increasing the work of the exempt employee who is not entitled to overtime.

4. On-call hours

Employees who are required to be available and are not able to use their free time due to the requirements of their employers are entitled to be paid for those hours. 

5. Remote work

When you leave work to go home, but continue your duties at home (such as answering emails or phone calls), this should be paid time. If your employer requires you to do this without being clocked in, they are breaking the law.

6. Charity work

Any time your employer requires your attention or presence, you are entitled to be paid for it. This includes any volunteer work the company is doing that you’re participating in, unless, of course, you wish to do it voluntarily.

What happens if an employer doesn’t pay overtime in California? 

California has the Private Attorneys General Act (PAGA) which allows employees to file lawsuits against employers for unpaid monies as well as civil penalties. The cost of these penalties will vary depending on different factors, but they will add up significantly.

By default, failure to pay overtime results in a fine of $100 for the first offense (pay period), and $200 for each subsequent offense. This penalty applies per employee. Additionally, employees (or former employees) can also seek civil penalties.

Sometimes California overtime laws are violated as an honest mistake and can be rectified once discovered. One way to avoid these mistakes is to use payroll software that automatically calculates and incorporates your employees’ hours.

Understanding California overtime laws

California overtime laws are important to understand when you own a business. Your employees should be properly classified and paid according to California labor laws, to ensure your business is compliant and to avoid hefty fines and penalties. 

Read our Complete Guide to Calculating Overtime Pay, to make sure you’re compliant and your employees are paid properly.