Both the federal government and the State of California require employers to pay overtime to hourly employees who work more than 40 hours a week.
Employers also may opt to pay an employee a flat salary. They frequently choose this option for managers and other executives and professionals.
The benefit is that employers may be able to declare these employees exempt from the overtime laws. Thus, the company does not have to pay extra should an employee have to work long hours in a given period of time.
Employers are not allowed to use mere labels to get around paying overtime
However, employers cannot exempt employees from overtime simply by paying them a salary and using a job title that implies they have administrative or executive functions.
Both the federal government and the State of California have specific rules covering when an employer can claim an employee is exempt from overtime.
However, California’s rules make it more difficult for employers to avoid paying overtime, and so they will usually trump federal law.
For example, in order to qualify for an executive or administrative exemption, an employee first has to be given considerable discretion in performing his or her job.
Morever, in California, employers who employ more than 25 workers also have to pay an executive or administrative employee just over $58,000 a year in order to claim an exemption from paying overtime. The federal salary requirement is much lower.
Companies which improperly claim employees as exempt may face legal trouble
Employers in this state need to be careful that they are correctly exempting their salaried employees from overtime pay. If they are careless in this respect, they may have to pay back overtime wages and other damages.