California's Takin' Care of Business and Working (Unpaid) Overtime

May 11, 2007, 12:45PM. By Nate Hendley

San Francisco, CA"We're in a transition period, where a lot of companies assumed that they did not have to pay overtime and they're learning—sometimes the easy way and sometimes the hard way—that they do," states lawyer Cliff Palefsky over the phone from his law office in San Francisco.

A member of the McGuinn, Hillsman and Palefsky law firm, Palefsky specializes in labour law and workers' rights. It's a booming field, because California companies are notorious for trying to weasel out of paying overtime. The situation is particularly glaring in the state's huge IT (Information Technology) sector, where computer engineers, designers, programmers and analysts often work excruciatingly long hours for zero overtime pay.

In California, all employees are supposed to get overtime if they toil longer than eight hours a day or 40 hours a week. There are some exemptions, however: professionals, such as doctors, accountants, outside sales representatives and managers are all exempt from laws mandating overtime. A manager is defined as someone who spends 50% or more of their time on supervisory duties.

Here's where the problem comes in: greedy companies have been known to classify employees as "managers" even if the only person they supervise is themselves. In addition to being incorrectly cast as managers, IT workers are often labelled as "independent contractors". A true independent contractor works for several companies on a freelance basis and is not eligible for overtime pay. Phoney independent contractors are tied to one company; they receive all the responsibilities that come with being an employee and none of the rights.

While California labour law is generally progressive, it is often murky when it comes to dealing with specific job categories and the benefits that go with them. This is especially true in new sectors like high-tech, says Palefsky.

"It's hard to get your hands around one-size-fits-all [job] definitions," he explains. "These jobs are complicated. A lot of people writing the laws don't really understand [computer] programming."

"I think it's part of the evolution of taking laws and concepts that were created for a much simpler era and trying to apply them to a new field—jobs that are more service-oriented, more intellectually-based than physically based," Palefsky adds.

That's not to say that California IT professionals haven't been fighting back: in late April 2006, a firm called Electronics Arts settled a California-based class-action lawsuit launched by software engineers. Under the terms of the settlement, the latter will receive $14.9 million in unpaid overtime.

In November 2006, the mighty IBM Corporation agreed to a $65 million settlement in a dispute about overtime pay. The money will be doled out to some 32,000 computer technicians who claimed they were denied proper wages for overtime work.

Other California IT firms that have been accused of not paying proper overtime include Apple, Hewlett-Packard, Sun Microsystems, Oracle, Cisco, etc.

According to Palefsky, a lot of California companies aren't necessarily malicious when it comes to denying overtime, but simply ignorant.

"There's a lack of sophistication and understanding" about overtime and other labour laws, he states. "Public education could go a long way in clearing it up."

Of course, a few more lawsuits might also go a long way to smarten California companies up.