California has the greatest amount of wage and hour laws of any state in the US, which means that complying with requirements and processing payroll in California is both complex and challenging situation. This post will look at some of the basic areas employers should be concerned with when doing business in California.
Different Rules for Exempt vs. Non Exempt Employees
The first thing to keep in mind is that both federal and California laws differentiate between exempt and non-exempt employees. Exempt classifications include the executive (manager), professional (doctors, attorneys, etc.) and administrative exemptions. These employees are generally exempt from minimum wage and overtime requirements. There are specific tests to designate an employee exempt under the Fair Labor Standard Act (FLSA), however, California also has its own set of tests that differ from tests mentioned in the FLSA. This is one of the areas where a compliance challenge arises for employers operating in California, and misclassifying a non-exempt employee as exempt can lead to huge financial penalties. Non-exempt employees include secretaries, clerks, drivers, cashiers etc.
Meal Period, Meal Waiver and Rest Period Rules
California also has meal period rules for various industries that employers must follow. Non-exempt employees working a shift of more than five hours must be provided with an uninterrupted meal period (which may be unpaid) of at least 30 minutes, within five hours of their shift. For employees working more than 10 hrs, a second meal period must also be provided. Meal periods should be taken in or about the middle of the work period and employers are required to maintain records reflecting the meal periods taken by employees. For prudence’s sake, employers should require their employees to take meal periods, even though California law does not mandate that meals periods actually be taken, only that they be provided. In the case of a class action lawsuit though, this flexibility could work against an employer.
If an employee is scheduled to work more than five hours, but not more than six hours in a workday, he or she can waive of the meal period – with a mutual agreement between the employer and employee – provided the employee does not work more than six hours on that particular workday. Employees working more than 10 hours but less than 12 hours can waive off their second meal period provided they take the first one.
Employees are also authorized and permitted to take one paid rest period of at least 10 minutes for every four hours worked, or major fraction thereof. These can be taken in or about the middle of the work period to the extent practicable. For shifts lasting less than 3.5 hours, no rest period is due. Employers need not document these periods, however, failure to authorize and permit rest periods will obligate employers to pay employees a rest period premium.
The Reporting Time Pay Rule
California’s reporting time pay rule is quite confusing. This rule states that if an employee is required to come to work, but is either not put to work or is given less than half their “usual or scheduled day’s work”, the employer must pay the employee for at least half the employee’s “usual or scheduled day’s work”, with the minimum at two hours and the maximum at four hours. For example, for a scheduled 5 hour shift, an employee who shows up but isn’t allowed to work must be paid for 2.5 hours (half of the scheduled shift). For a 3 hour scheduled shift, the employer must pay them for 2 hours, since this is the minimum payout under the reporting time pay rule, even if the employee works only half the shift, i.e. 1.5 hours. On the other hand, if an employee works 2 hours during a 5 hour scheduled shift, they must be paid for 2.5 hours (which is half their regularly scheduled shift). Similarly, an employee only working 3 hours on a 10 hour shift must be paid for 4 hours, as the maximum guarantee under the rule is 4 hours.
The Overtime Pay Requirements
The general overtime rule in California is that employees must receive overtime pay of time and a half when working more than eight hours up to and including 12 hours in a workday, and double time for hours in excess of 12 hours in a workday. Employees receive time and a half for the first 8 hours on their seventh consecutive workday in a workweek (and then double time) and for time worked over 40 hours in a workweek. Overtime calculations in California are complex and employers should check the requirements for their industry to remain compliant.
The Paycheck and Paystub Requirements
California also has different paycheck and paystub requirements. Paychecks must be negotiable, payable in cash, on demand, without discount, at some established place of business in the state with the name and address on the instrument, and employers must have sufficient funds to pay checks for at least 30 days. On the other hand, specific information must be detailed on a paystub, including gross/ net wages earned, total hours worked, piece-rate information, all deductions, inclusive dates showing the periods being paid, the employee’s name, the last four digits of the SSN or employee identification number, the name and address of the employer and hourly rates being paid along with the hours at each rate.
The information provided here is just an overview of California wage and hour laws. In reality, they are even more complicated and businesses have a tough time remaining compliant with all the laws and regulations that apply to them. To get more detailed information on state and federal wage and hour laws that apply to California, join Vicki M. Lambert, CPP in a live webinar.