2020 California Overtime Law

The US Department of Labor's new overtime rule that went into effect January 1, 2020, extends overtime pay eligibility to about 1.3 million more employees.

What is the California overtime law?

We can break down the California overtime law into two parts -- time and a half and double-time pay.

Time and a half pay

Employers are required to pay eligible employees 1.5 times their standard rate of pay when working more than 8 hours in a single workday and more than 40 hours in a week.

How it works:

• 1.5x standard rate for work over 8 hours in a workday
• 1.5x standard rate for work over 40 hours in a workweek
• 1.5x standard rate for the first 8 hours on the seventh consecutive day in a workweek

Double-time pay

Employers are required to pay eligible employees two times their standard rate of pay when working more than 12 hours in a single workday or more than 8 hours on their seventh consecutive day of work. 

How it works:

• 2x standard rate for work over 12 hours in a workday
• 2x standard rate for work over 8 hours on the seventh consecutive day in a workweek

In this case, California exceeds the federal overtime law, which only requires employers to pay 1.5 times the standard rate of pay.

Who is eligible for overtime?

Eligible employees must be at least 18 years old (16 or older if they are legally allowed to leave school for work), employed in a non-executive, non-administrative, or non-professional role, and does not exceed the minimum salary threshold. 

What is the minimum salary threshold?

As of January 1, 2020, the threshold raised from $455 per week to $684 per week. That makes employees earning $35,568 per year or less eligible for overtime pay.

Good news for employers: non-discretionary bonuses and incentive payments (including commissions) can now satisfy up to 10% of the salary when paid at least annually.

Who is exempt from overtime?

Aside from exceeding the minimum salary threshold, there is also the duties test. The test states that for an employee to be exempt from receiving overtime pay, their job duties must fall under one of the following categories:

Executive

• Managing the enterprise, a permanent department, or subdivision of the enterprise
  • Examples: CFO, CMO, VP

Administrative

• Office or non-manual work related to management or general operations of the business
  • Examples: payroll, HR, marketing professionals

Professional

• Learned professionals
  • Advanced knowledge and regular exercise of discretion and judgment
  • Examples: lawyers, doctors, dentists
• Creative professionals
  • Invention, imagination or talent in a creative or artistic field
  • Examples: actors, composers, writers

Computer employee

• Systems analysis techniques, design, and development of software systems or computer machines, or similarly skilled work
  • Examples: Computer systems analyst, computer programmer, software engineer

How can my organization comply with the new salary threshold?

For starters, evaluate your current employees' salaries and duties to determine if anyone qualifies for overtime requirements under the new rule. If you find that you do have employees that will be eligible for overtime, you will need to update their employment details in your HRIS system. Most systems give the option to designate an employee type of 'salaried exempt' or 'salaried non-exempt.'

There are a few alternative options as well. You may consider bumping a qualified employee's salary above the threshold, hiring more employees to spread the workload, or rescheduling employees. Depending on your organization's compensation structure, these alternatives may be a more cost-effective option.

>> Read more: Improve Productivity with Employee Time and Attendance Tracking