7 Things You Need to Know About 2018 California Overtime Laws

If you are a California business owner, one of the most common labor issues you will face with employees involves overtime. California overtime law is stricter than federal law, and failing to comply, even unintentionally, can cost you significantly if an employee files a claim or takes you to court.

Before an employee who knows the rules files a claim against you, make sure you know the facts first.

1. California Overtime Law Is Different From Federal Law

California employment law is more favorable to employees than federal law, and that means stricter compliance obligations for employers.

Federal law requires overtime pay only for hours worked beyond 40 per week. California goes further, adding daily overtime requirements on top of that weekly threshold. Employers expanding from other states get caught on this regularly.

For current figures and an overview of how the rules have evolved, see our guide to California Overtime Laws for Employers in 2026.

2. Overview of California Overtime Law

California non-exempt employees cannot work more than 8 hours per day or 40 hours per week at their standard pay rate. Here is how overtime compensation works:

• 1.5x regular pay for all hours worked beyond 8 in a single day, up to and including 12 hours

• 1.5x regular pay for the first 8 hours worked on the seventh consecutive day in a workweek

• 2x regular pay for all hours worked beyond 12 in a single day

• 2x regular pay for all hours worked beyond 8 on the seventh consecutive day in a workweek

Both daily and weekly thresholds apply independently. Employers must pay whichever results in the higher overtime obligation without double-counting the same hour.

3. What Counts as a Workweek?

In California, a workweek is any seven consecutive 24-hour periods, i.e., 168 hours total. It must begin on the same day and at the same time each week.

Once established, an employer cannot change the start of the workweek to avoid paying overtime. The only exception is if the schedule change is permanent and made for a genuine business reason, not to manipulate overtime calculations.

4. Which Employees Are Exempt From California Overtime Law?

Not all employees are covered. California recognizes several exemption categories:

Exempt status depends on both salary and actual job duties. A title alone does not determine exemption. If you are unsure whether a role qualifies, our Wage and Hour Defense team can help you assess your classification risk before a claim is filed.

5. How California Overtime Is Calculated

Overtime is calculated based on the employee's regular rate of pay, not just their base hourly wage.

For salaried employees eligible for overtime, divide the annual salary by 52 weeks, then by 40 hours, to arrive at the regular hourly rate. Overtime is then calculated from that figure.

One area employers frequently get wrong: the regular rate must include non-discretionary bonuses, commissions, and shift differentials, not just base pay. If these are excluded from the calculation, every overtime check may be underpaid, and that error compounds across pay periods.

Facing an overtime claim or unsure about your calculations? DefendMyBiz defends California employers exclusively. Book a free 15-minute consultation and get a clear picture of your exposure.

6. Vacation Days and Sick Days Do Not Count Toward Overtime

Hours not actually worked cannot be counted as overtime hours.

If an employee worked 40 hours and took one sick day in the same week, they worked 40 hours, not 48. The sick day does not push them into overtime territory.

The same principle applies to holiday bonuses, which are considered separate from regular pay and are excluded from overtime calculations. However, non-discretionary bonuses tied to hours worked, such as a production bonus, must be factored into the regular rate when calculating overtime. Missing this is a common and costly mistake.

7. What Employees Can Recover if You Violate Overtime Law

The financial exposure from an overtime violation depends on whether the claim is filed under federal FLSA law or California state law.

• Under the FLSA, a successful employee can recover back pay, attorney fees, liquidated damages, and injunctive relief. Liquidated damages are automatic unless you can demonstrate that you acted in good faith and had a reasonable belief that your pay practices did not violate the law.

• Under California law, the remedies are similar, but the framework is different. California Labor Code Section 1194 provides for back pay, interest, and attorney fees. California does not award liquidated damages, but the breadth of its overtime definitions and the addition of PAGA exposure can make a California claim more expensive overall.

If you have already received a claim or lawsuit, our guide on what to do when you are sued for unpaid overtime in California covers the steps to take immediately.

Key Takeaways

Here is a summary of what every California employer should know about overtime law:

• California's overtime law is stricter than federal law. Daily thresholds apply in addition to weekly ones

• Not all employees are covered. Executive, administrative, and professional roles may be exempt based on salary and duties

• Overtime is calculated on the regular rate of pay, which includes non-discretionary bonuses and commissions

• Vacation and sick days cannot be counted as hours worked for overtime purposes

• Violations can result in back pay, attorney fees, and, in federal cases, liquidated damages

• California adds PAGA exposure on top of individual overtime claims, which multiplies the risk significantly

Our California Employment Law Compliance Guide is a practical starting point for auditing your current pay practices before a problem arises.

Have more questions about your overtime obligations or need help defending a claim? DefendMyBiz represents California employers exclusively, from compliance review to full litigation defense. Contact us today for a free consultation.

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Disclaimer: The above content is for informational purposes only. This is not legal or tax advice. Laws, IRS guidance, and withholding requirements can change, and outcomes depend on specific facts. You are advised to contact a qualified attorney for any legal advice.