Calculating Overtime Pay for Day Rate Employees in California

The California Labor Commission takes a position on how overtime pay is calculated for those paid using a day rate that is significantly different than federal labor laws – providing greater benefits to workers and the right to fair overtime pay.

For California employees who are paid a “day rate” or guaranteed fixed daily compensation that is paid regardless of the number of daily hours worked, the California labor laws provide that, in most cases, the correct calculation of overtime pay uses eight (8) hours per day for the purpose of determining the employee’s regular rate of pay. The resulting rate must be at least the state minimum wage.  The regular rate is then multiplied by 1.5 or 2 depending on the number of hours worked in the particular day. 

  • For Example:  If an employee works 10 hours each day for 5 days a week, at a day rate of $400 per day, the employee has earned base pay of $2,000 for the week.  Under federal wage laws, the employee generally would be entitled to only $200 in overtime pay, however, under California’s rules for overtime pay calculation, the employee is entitled to $750. 

This dramatically different result is due to California’s Labor Commission’s intent that in establishing the regular rate of pay for salaried and day-rate employees their remuneration is divided by the agreed or usual hours of work, exclusive of daily hours over eight.  The agreed or contracted hours may be less than the legal maximum regular hours per day, in which case the contracted hours must then be used as the divisor to establish the regular hourly rate of pay. All hours over the legal maximum regular hours in any one workday (typically 8) must be compensated at overtime rates.

The federally permitted overtime calculation method that results in a lowering of the regular rate of pay the more hours that are worked (fluctuating workweek / Chinese overtime method), encourages employers to require overtime work and flies in the face of the very reasons that California adopted premium pay for overtime – premium pay was to provide a “penalty” to discourage employers from requiring overtime…and fairly compensate workers for the added personal and physical burdens of the extra work.

Are You Being Cheated Out of Overtime Pay?

Workers should remember that the general rule under California state labor laws on overtime is that a day-rate covers up to 8 hours per day and the resulting hourly rate should then be multiplied by 1.5 (or 2 if 12+ hours worked in a day) to calculate the rate for each overtime hour. 

If you work in California and are paid on a day rate and you are not being paid 1.5 (or 2) times the correct regular rate of pay for all overtime hours, or if you are not sure that your overtime pay is being calculated correctly, contact us for a free and confidential review of your specific situation, and to see how much you may be owed in back pay.