Can California Employers Make Overtime Mandatory?

Sacramento, CACASE, the union that represents California attorneys, administrative law judges and many other state employees, has objected to an ill-conceived coronavirus outreach effort that forced hundreds of Department of Industrial Relations employees to work over the Fourth of July weekend. Unlike many California Labor Code lawsuits, this dispute is not about failure to pay for overtime. Instead, it is about requiring overtime hours that yielded very little public benefit, over a long holiday weekend with only a few hours’ notice. Since it looks like California workers will be living with periodic Covid-19 emergencies for the foreseeable future, now is as good a time as any to review basic overtime rules under the California Labor Code.

Laudable goal – badly managed

On the afternoon of Friday, July 3, hundreds of DIR workers were told to report to work over the holiday weekend in order to call and visit businesses to advise them about COVID-19 health and safety guidance, labor law requirements and workers’ rights. Three problems quickly emerged:

• Some workers had difficulty making childcare or eldercare arrangements on such short notice;
• Those who came to work had little success in reaching appropriate managers at the businesses in order to share compliance information; and
• Some employees had pre-approved Family Medical Leave Act absences cancelled in violation of the law.

Nonetheless, in his news conference of July 6, Gov. Gavin Newsome touted the effort as an example of successfully increased enforcement in critical areas. Some speculate that the “440,000 individual contacts” cited by the governor must include failed efforts.

Can an employer mandate (even ill-conceived) overtime?

Within certain limitations, California employers can require employees to work overtime. The limits come principally from two sources.

The first source is any applicable Industrial Wage Order. For example, in industries covered by Wage Order 4 (professional, technical, clerical, mechanical and similar occupations) and Wage Order 16 (certain onsite occupations in the construction, drilling, logging and mining industries), employers may require employees to work up to 72 hours per workweek. Additional overtime can be required in an emergency. The same 72-hour limit applies in agriculture (Wage Order 13), except that all work beyond 72 hours per week must be worked voluntarily, with no negative employment actions taken against those who refuse to work.

Within the restrictions of any applicable wage order, union employees, like those organized by CASE, may also be protected from mandatory overtime by the terms of their collective bargaining agreements. In addition, certain statutes, like FMLA, may protect requested absences.

Other than those limitations, however, employers may require overtime and may discipline an employee, up to and including termination, if the employee refuses to work scheduled overtime. There is also no specific amount of notice required under California law before changing an employee's schedule or requiring overtime.

Ill-conceived mandatory overtime appears, however, to be a relatively rare problem. Employers must pay a premium for overtime hours. The prospect of cost concentrates the employer mind wonderfully.

The challenge of getting paid for overtime work

Under California law, employers are required to pay all eligible employees (referred to as “nonexempt employees”) additional pay for the work done in excess of 8 hours per day, 40 hours per workweek or for the first eight hours worked on the 7th consecutive day worked in a workweek. An overtime rate of twice the nonexempt employee’s regular rate of pay applies to hours worked in excess of 12 hours in a workday or in excess of 8 hours on the 7th consecutive workday in a workweek.

Occasionally employers fall afoul of these requirements, especially where it is harder than usual to calculate the “regular rate of pay.” This can happen when two rates apply for different tasks or the minimum wage changes. Ordinarily, however, disputes center on either how hours are counted or whether a worker is misclassified as an exempt employee or an independent contractor.

Even brief amounts of time should be counted

In July 2018, in Troester v. Starbucks, the California Supreme Court held that even working a few minutes before clocking in or after clocking out is compensable time for which a worker must be paid. The same rule applies to mandatory security checks that employees must undergo either before or after work. These two recent developments have been at the heart of recent California labor lawsuits.

Two kinds of misclassification errors

The other big category of overtime dispute involves the thorny question of who is a “nonexempt employee” entitled to overtime pay. In some circumstances, a worker is misclassified as an independent contractor, not covered by overtime rules, rather than an employee.

Effective January 1, 2020, the California legislature’s adoption of AB 5, codifies rules that presume that all workers (subject to certain exceptions) are employees, unless the worker:

• is free from the control and direction of the hiring entity in connection with the performance of the work; and
• performs work that is outside the usual course of the hiring entity’s business; and
• is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.

AB 5 thus greatly expands the pool of workers who may be entitled to overtime.

In addition, some employers misclassify employees as “managers” to exempt them from overtime entitlement. What matters is not the worker’s title, but salary and duties. The rule requires that exempt (and thus non-protected) employees:

• earn a salary that is at least twice the state minimum wage for full-time employment;
• primarily perform administrative, executive or professional duties; and
•  exercise discretion and independent judgment in the performance of those tasks.

Overtime remains a common source of disputes under California labor law. Sometimes it involves a questionable mandate for overtime work, but for most workers the struggle is about how to get paid.