California Overtime: What You're Owed, and Why 'Salaried' Doesn't Mean 'Exempt'

Employers in California routinely tell workers they are "salaried" or "exempt" and therefore not entitled to overtime. Often that is wrong. California's overtime rules apply to more workers, kick in sooner, and pay more than federal law — and the tests for exemption are demanding. If you regularly work more than eight hours a day and don't see overtime on your check, it is worth understanding what the law actually requires.

The Overtime Rules

Cal. Labor Code § 510 sets the basic requirements for nonexempt employees:

• One and one-half times the regular rate of pay for all hours worked beyond eight in a workday, and beyond forty in a workweek
• One and one-half times the regular rate for the first eight hours worked on the seventh consecutive day of work in a workweek
• Double the regular rate for all hours worked beyond twelve in a workday, and beyond eight on the seventh consecutive day

The daily threshold is the important difference from federal law. The Fair Labor Standards Act requires overtime only after forty hours in a week. California requires it after eight hours in a day, regardless of the weekly total. An employee who works four ten-hour days is owed eight hours of overtime under California law even though the weekly total is exactly forty.

The Regular Rate

Overtime is calculated on the "regular rate of pay," which is not always the same as the hourly wage. The regular rate must include most forms of compensation the employee earns — nondiscretionary bonuses, commissions, shift differentials, and the value of certain other payments. An employer that pays overtime on the base hourly rate alone, ignoring a production bonus, has underpaid.

Who Is Exempt

California recognizes several exemptions, but the one employers invoke most often is the "white collar" exemption for executive, administrative, and professional employees. To qualify, an employee must satisfy both a salary test and a duties test.

Salary test

The employee must be paid a monthly salary equivalent to no less than two times the state minimum wage for full-time employment. See Cal. Labor Code § 515(a). Because California's minimum wage rises annually, this threshold rises with it. An employee paid a salary below that figure is not exempt under this exemption regardless of duties.

Duties test

The employee must be primarily engaged in exempt duties, meaning more than half of their working time is spent on them, and must customarily and regularly exercise discretion and independent judgment. What counts as exempt work depends on the exemption:

• Executive: managing the business or a department, directing the work of at least two employees, with authority to hire and fire or whose recommendations carry particular weight
• Administrative: office or non-manual work directly related to management policies or general business operations, involving the exercise of discretion and independent judgment on significant matters
• Professional: licensed or certified in law, medicine, dentistry, optometry, architecture, engineering, teaching, or accounting, or engaged in a learned or artistic profession requiring advanced knowledge

Titles do not control. An "assistant manager" who spends most of the day running a register, stocking shelves, and doing the same work as hourly employees is not an executive. An "administrative coordinator" who follows detailed procedures and makes no significant independent decisions is not administrative. The employer bears the burden of proving an exemption applies.

Common Ways Employees Are Shortchanged

• Misclassification as exempt, as described above
• Off-the-clock work — being required to arrive early, stay late, respond to messages after hours, or work through breaks without pay
• Time rounding that consistently favors the employer
• Automatic meal break deductions for breaks that were not actually taken
• Miscalculating the regular rate by excluding bonuses or commissions
• Misclassification as an independent contractor, which removes the worker from overtime protection entirely; California's test for contractor status under Cal. Labor Code § 2775 is strict

What You Can Recover

An employee who has been denied overtime can recover the unpaid wages plus interest. Under Cal. Labor Code § 1194, an employee who prevails in an action for unpaid overtime is also entitled to reasonable attorney's fees and costs. Several penalty provisions may add to the recovery:

• Waiting time penalties under § 203: if an employer willfully fails to pay all wages due when an employee leaves, the employee's wages continue as a penalty for up to thirty days
• Wage statement penalties under § 226: an employer that knowingly and intentionally fails to provide accurate itemized wage statements is liable for statutory penalties, capped at $4,000 per employee
• Civil penalties under the Private Attorneys General Act, Cal. Labor Code § 2698 and following, which allows an employee to recover penalties on behalf of the state and other aggrieved employees

Time Limits

Claims for unpaid overtime under the Labor Code generally carry a three-year statute of limitations. See Cal. Code Civ. Proc. § 338(a). Claims brought under the Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, can reach back four years for restitution of unpaid wages. PAGA claims have a one-year limitations period and require a pre-filing notice to the state.

What to Do

• Keep your own records of the hours you actually work, including start and end times and any work performed outside scheduled hours.
• Save your pay stubs and any written communications about your schedule, classification, or pay.
• If you are classified as exempt, write down what you actually do in a typical week and how much of your time it takes.
• Do not assume your employer's classification is correct.

The Bottom Line

California's overtime law is generous, its exemptions are narrow, and the employer bears the burden of proving one applies. If you work long days and see no overtime, or if your "exempt" job looks a lot like the hourly jobs around you, the classification may be wrong — and the unpaid wages, interest, penalties, and fees can be substantial.