Cal-Peculiarities: How California Employment Law is Different 2022 Edition

©2022 Seyfarth Shaw LLP  www.seyfarth.com 2022 Cal-Peculiarities | 207 Salaried nonexempt employees: fluctuating workweek method for overtime pay calculations not permitted. California law differs from federal law on how to calculate overtime pay for salaried nonexempt employees. Federal law permits employers to use the “fluctuating workweek” method, which recognizes the economic reality that the weekly salary covers all hours worked that week, so that only the overtime “premium” is due for overtime hours. California, by contrast, requires the use of the “fixed workweek” method, which irrebuttably presumes that the weekly salary is paid only for a 40-hour workweek (at most ). 112 Under this method, both overtime premium and base salary would be due for each overtime hour worked. As shown below, the “fixed workweek” method results in greater liability where employers have misclassified salaried nonexempt employees as exempt. Under the federal “fluctuating workweek” method, the regular rate for a given week for a nonexempt salaried employee is the weekly salary divided by the total number of hours worked that week. Consider an employee paid $800 per week who works 50 hours one week: the regular rate for that week would be $16 per hour ($800 divided by 50), and the overtime premium rate would be $24. The amount of premium pay due for that week would be ten hours of overtime times $8 per hour, or $80, because for the ten overtime hours the employee has already been paid the regular rate of $16, and would be entitled to only an additional $8 per hour (0.5 times the regular rate). In California the regular rate would be higher. For the same nonexempt salaried employee, working the same hours, the regular rate would be $800 divided by only 40 hours (not the 50 hours actually worked ). 113 The regular rate would thus be $20, making the premium rate $30. In addition, because the fixed workweek method presumes that a salary covers only the first 40 hours of work, the employee would be entitled to extra pay in the amount of ten hours multiplied by the entire premium rate of $30, not just the extra $10 per hour. The federal and California methods thus diverge at two junctures: (1) how to calculate the regular rate of pay, and (2) what multiplier to apply to the amount due. As to the regular rate , the federal fluctuating-workweek method divides weekly salary by all hours worked in a week, while the California fixed-workweek method divides weekly salary by only 40 hours. As to the multiplier , the fluctuating workweek multiplies the regular rate by 0.5, while the fixed-workweek multiplies the regular rate by 1.5. Thus, the employee who has $80 of weekly premium pay elsewhere in America would have $300 in California: Weekly Salary Weekly Hours Regular Rate Multiplier OT Hours OT Pay Fluctuating Workweek $800.00 50 $16.00 0.5 10 $80.00 Fixed Workweek $800.00 50 $20.00 1.5 10 $300.00 7.5 Wage Payment Rules Full and prompt payment of wages due “is a fundamental public policy” of California . 114 V arious Labor Code provisions require immediate (or otherwise prescribed) payment of wages upon an employee’s discharge, layoff, or resignation , 115 require regular payment of wage s, 116 and prohibit an employer from insisting that an employee release wage claims before paying the employee all wages that are undisputably du e. 117 California courts hold that these and similar statutes, considered “remedial in nature,” must be liberally construed, “with an eye to promoting the worker protections they were intended to provide. ” 118