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Volume XII, Number 268

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Time Is Money: A Quick Wage-Hour Tip on … Avoiding Common California Wage and Hour Mistakes and “Going the Distance”

Employers based outside of California can suffer knockout blows if they enter the ring as employers in California and operate under the mistaken assumption that adherence to the Fair Labor Standards Act (“FLSA”) is the same as complying with the California Labor Code and Wage Orders.  Below are the main ways (but certainly not the only ways) employers are “caught cold” because they do not receive or apply California wage-and-hour training and learn the hard way that the plaintiffs’ bar will not pull any punches.

  1. Minimum Wage – The federal minimum wage is $7.25, and it has not changed since 2009. California’s state minimum wage and its regular increases are well publicized. Currently, the state minimum wage is $15 per hour for employers with 26 or more employees. But employers are often unaware that many California cities and counties have their own minimum wage laws, and of those, some have separate rates for certain types of workers such as hotel workers.  Also, indexed rates apply to many of these laws.  This means the minimum wage rates will increase based on the applicable Consumer Price Index, instead of on a set schedule.

  2. Daily Overtime and Double Time – Just as under the FLSA, California employers must pay an overtime premium of time-and-a-half the regular rate to employees who work more than 40 hours per week. However, California also requires employers to pay an overtime premium of time-and-a-half to employees who work more than 8 hours per day, and pay twice the regular rate, or double time, to employees who work more than 12 hours per day.  On the seventh consecutive day worked of the workweek, employers must also pay a premium pay of time-and-a-half the regular rate for the first 8 hours of work, and double time for all hours worked in excess of 8.

  3. Meal and Rest Periods – The FLSA does not require meal or rest breaks, but provides that short breaks taken during the workday (usually between 5 and 20 minutes) are compensable work hours. In contrast, California has strict requirements for meal and rest periods.  When employees work longer than 5 hours, California law generally requires employers to provide an unpaid duty-fee meal period of at least 30 minutes in length before the employee begins the sixth hour of work.  When an employee works more than 10 hours, the employer must provide a second meal period before the employee starts the eleventh hour of work.  For employees who work more than 3.5 hours, employers must provide a paid ten-minute, duty-free rest break for each 4 hours of work (or major fraction thereof) to be taken in the middle of the four-hour segment to the extent possible.  Employers who fail to provide the required meal and rest breaks must pay premium pay valued at one hour at the regular rate of pay (not the base hourly rate) and can be required to pay one premium for meal and one for rest each day.

  4. Flat Sum Bonuses – Employers who are FLSA-savvy are well aware that they must include non-discretionary bonus amounts in the regular rate of pay when calculating overtime. The overtime premium on a bonus will be computed by dividing the total pay by the total hours worked to get the regular rate, and the overtime premium is paid at .5 times the regular rate for each overtime hour worked.  California applies this formula, too, but not to “flat sum bonuses.”  A flat sum bonus is one that does not increase or have the potential to increase roughly in proportion to hours worked.  For a flat sum bonus, the regular rate is computed by dividing the total pay by the non-overtime hours worked, and the overtime premium is paid at 1.5 times that amount for each overtime hour worked (or twice that amount for each hour worked in excess of 12 per day).

  5. Employee Classification

    1. Independent Contractors – Although the federal Department of Labor has announced that it is developing a proposed rule for determining independent contractor status under the FLSA, the law currently involves application of a multi-factor test that examines the “economic reality” of the relationship. California, on the other hand, has codified the “ABC” test, strictly requiring that the relationship satisfy three specific factors in order for an individual to be deemed an independent contract rather than an employee.  It is a difficult test to satisfy.

    2. White Collar Exemptions – Under the FLSA, employees might be exempt from overtime under one of the following “white collar” exemptions: executive, administrative, professional, outside sales, and highly compensated.  To be exempt under the FLSA, an employee must earn at least $684 per week on a salary basis, or $35,568 per year (and $107,432 in the case of highly compensated employees).  Other requirements must also be met, including in most cases, that the employee’s “primary duty” is exempt work.  Under the FLSA, the primary duty is the main or most important duty, which might not be the duty the employee spends most of the time performing.  California law also recognizes exemptions from overtime.  Just some of the critical differences between federal and California overtime exemptions are as follows.  To be properly classified as exempt, an employee must earn a monthly salary equivalent of at least twice the state minimum wage, which is at least $62,400 for employers with 26 or more employees.  California does not have a highly compensated employee exemption. Also, an employer must establish that the employee spends more than 50% of the time performing exempt duties.

  6. Paystubs – The FLSA does not require employers to provide employees with paystubs. The California Labor Code, on the other hand, requires employers to furnish employees with accurate itemized wage statements on payday, which must include all of the information specified in the Labor Code.  A failure to provide this information will subject an employer to damages and penalties.

  7. Travel Time – Under the FLSA, hours worked ordinarily do not include travel time spent beyond normal work hours. However, California law considers all compulsory travel time to be compensable travel time.

  8. Paid Sick Leave – The FLSA does not require employers to pay employees who do not work because they are sick. California law requires employers to provide at least 24 hours of paid sick leave per year, which can be accrued under one of two specific methods.  Cities and counties may require additional paid sick leave.

  9. Payment upon Termination – Federal law does not require payment of final wages to terminating employees any sooner than the next regular payday. However, in California, an employer must pay all final wages, including accrued and unused vacation, to terminating employees as follows: (a) employees who voluntarily resign must be paid final wages within 72 hours of resignation; (b) employees who are involuntarily terminated must be paid on the day of discharge.  An employer will be subject to “waiting time” penalties, which can be up to 30 days’ pay, for failing to comply.

  10. PAGA – The California Private Attorneys General Act allows an individual aggrieved employee to file a civil lawsuit as the proxy of the state to recover civil penalties that otherwise could be recovered only by the Labor Commissioner. Unless the Labor Code provides a different penalty, the default penalty is $100 per employee per pay period for initial violations, and $200 per employee per pay period for subsequent violations.  These penalties are usually many times greater than any actual damages arising from the violations.

The differences between the federal and California law listed above are just some examples, and the examples listed are far more nuanced than indicated in this post.

Even employers who are champions of FLSA compliance will find themselves unprepared in a completely new division without California-specific training.  Employers confronting these issues in litigation feel like they’ve been sucker punched.  But it’s the law.

©2022 Epstein Becker & Green, P.C. All rights reserved.National Law Review, Volume XII, Number 243
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About this Author

Amy S. Ramsey Labor & Employment Attorney Epstein Becker & Green Los Angeles, CA
Member of the Firm

AMY S. RAMSEY is a Member of the Firm in the Employment, Labor & Workforce Management practice, in the Los Angeles office of Epstein Becker Green. She partners with her clients to deliver innovative and practical solutions to employment-related issues, leveraging her two decades of legal experience.

An accomplished litigator, Ms. Ramsey develops strategies that reduce the scope and value of cases to minimize the expense and business disruption of litigation and to expedite resolution.

In addition, Ms. Ramsey:

  • Has extensive...
310-557-9526
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