EMPLOYERS WHO FAIL TO PAY OVERTIME OR CORRECT AMOUNT OF OVERTIME RISK SUBSTANTIAL FINANCIAL PENALTIES

July 25, 2013

I. BASIC OVERTIME LAW

California law requires payment of overtime to nonexempt workers in two situations: *

(1) Daily overtime at the rate of one and one-half times the employee’s hourly pay is required for all work in excess of eight hours per day. In addition, daily overtime at the rate of two times hourly pay is required for all work in excess of 12 hours per day.

(2) California law requires weekly overtime at the rate of one and one-half times the employee’s hourly pay for each hour worked in excess of 40 hours each week.

*NOTE: This alert sets forth the general rules regarding overtime law and claims in California. Exceptions exist which are not the subject of this alert.

II. CLAIMS ARISING FROM A TYPICAL OVERTIME CASE

A. THE CASE MAY BE FILED WITH THE LABOR COMMISSIONER OR DIRECTLY IN THE SUPERIOR COURT.

(1) The case may be filed with the California Division of Labor Standards Enforcement, the state agency with power to enforce California’s labor laws, commonly referred to as the Labor Commissioner. The Labor Commissioner has access to all California workplaces and employee records, is required to investigate all wage complaints, and depending on the issues raised may schedule a conference between the parties or a “Berman” hearing on the wage complaint or both; or

(2) The overtime case may be filed directly in Superior Court where a judge or a jury will hear the case. The case may include other employment claims such as wrongful termination, employment discrimination, employment harassment, etc., if applicable. **

**NOTE: There are exceptions to this general rule which are beyond the scope of this alert.

B. TYPICAL CLAIMS IN AN OVERTIME CASE

(1) If filed with the Labor Commissioner, a typical overtime claim will include:

(a) Demand to Pay Overtime Wages not paid by the employer at the applicable rate (1 ½ times hourly rate for each hour worked in excess of eight (8) hours in a day and 40 hours in a week, and two (2) times hourly rate in excess of 12 hours worked in a day.)

For example, an employee’s hourly rate is $10 and normal workweek is 40 hours. If she/he works 10 hours on Monday; eight hours on Tuesday, 13 hours on Wednesday, eight hours on Thursday and Friday, and four hours on Saturday, the employee is entitled to the following overtime pay:

Day	Hours Worked	OT Hours	How OT Calculated	Amount of Daily Wages
Monday	10	2	2 @ $15=$30	$80 + $ 30 OT=$110
Tuesday	8	0	NA	$80
Wednesday	13	5	4 @ $15=$60; 1 @$20	$80 + 60 + 20=$160
Thursday	8	0	NA	$80
Friday	8	0	NA	$80
Saturday	4	4	4 hours @ $15=$60	$60

Under the above scenario, this employee, who worked 51 hours for the week, would be entitled to gross wages for the week of $570, based on the following:

• 24 straight-time hours;
• 10 overtime hours at 1 ½ times hourly rate (two for Monday, four for Wednesday, and four for Saturday); and
• 1 overtime hour at two times hourly rate for Wednesday.

Multiply the above scenario by several weeks, months or even a few years. In my experience, failure to pay OT rarely occurs for only one week and may affect similarly situated employees, creating the basis of a class action lawsuit. An OT lawsuit may be filed in court after an employee leaves employment. The statute of limitations (the time in which an OT action must be filed in court) is three years. (Cal. Code Civ. Proc. § 338 (liability created by statute other than penalty or forfeiture).) California Labor Code §§ 1194 and 1198 form the statutory basis.

(b) Liquidated Damages for Failure to Pay Overtime Wages is an amount equal to the amount of overtime that employer failed to pay. (29 U.S.C. § 216(b).) Thus: If the employer paid no OT wages in the above example, the employer would have to pay an additional amount for failure to pay any wages at all for the overtime worked, as follows:

• $20 for Monday;
• $80 for Wednesday; and
• $60 for Saturday

(c) Waiting Time Penalty for failure to pay all wages owed upon termination of employee by employer or within 72 hours following resignation of employment by employee at the rate of the employee’s daily rate of pay for 30 days. (Cal. Labor Code § 203.) Under the above scenario, assuming the employee’s daily pay is $80, the employer may be liable for waiting time penalties in the amount of $2,400 ($80 per day x 30 days).

(d) Failure to Provide Accurate Wage Statements: For a knowing and intentional failure by an employer to provide an accurate wage statement, an employee is entitled to recover the greater of all actual damages or $50 for the initial pay period violation and $100 for each subsequent violation up to a maximum award of $4,000, plus reasonable attorney’s fees and costs. (See Cal. Labor Code § 226.)

(2) If filed in the Superior Court, a typical overtime case may include all of the following:

(a) All of the claims and damages listed above;
(b) Reasonable attorney’s fees and costs of suit;
(c) Liquidated damages for failure to pay overtime in violation of federal law in an amount equal to the unpaid overtime wages;
(d) Minimum wage claim (i.e., if no overtime paid, computed hourly rate may be less than minimum wage) (Cal. Labor Code §§ 1194 (minimum wages) 1194.2 (liquidated damages (equal amount) for failure to pay minimum wage);
(e) Additional common law and statutory claims involving wrongful termination from employment, employment discrimination and harassment, fraud, and other claims which can be filed in a Superior Court case but not a Labor Commissioner proceeding; and
(f) Damages for the claims set forth in (2)(e), above, including, without limitation:

1. Payment of lost back wages and front pay continuing for a reasonable time depending upon a finding by the judge or jury;
2. Medical, psychiatric, psychotherapy bills, and the like;
3. Damages for pain and suffering;
4. Damages for severe emotional distress (often post-traumatic stress disorder (PTSD); and
5. Punitive damages.

NOTE: This alert is designed to provide a summary of general information. It does not set forth the entire scope of an action for overtime wages; nor does it offer solutions to individual problems. Employers with specific overtime questions should consult legal counsel.

Kenneth J. Sargoy, Esq., provides assistance and representation in connection with employment matters. Questions involving overtime laws as well as other employment issues may be directed to Kenneth J. Sargoy, Esq., telephone 310-208-1003 or or to his email, [email protected]

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