California Overtime Law 2025: All You Need to Know

Under federal law, an employee only receives time-and-a-half or overtime pay on a holiday if the hours worked that day exceed 40 for the workweek. Under federal law, overtime compensation is at least 1.5 times the employee’s regular pay rate (time and a half). In some cases, particularly when employees are represented by a labour union, overtime may be paid at a higher rate than 1.5 times the hourly pay. In some factories, for example, if workers are required to work on a Sunday, they may be paid twice their regular rate (i.e., “double time”). In some other jurisdictions, such as Canada, employers might be required to pay the overtime at the higher rate (e.g. 1.5 times the normal rate), but also be allowed to require time off in lieu at the normal rate. Thus, an employee might work 48 hours in one week, and 32 hours the next week (assuming over 40 hours is overtime), and be paid an extra amount equivalent to 4 hours work (8 multiplied by 0.5).

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It need not coincide with the calendar week, but may begin on any day and at any hour of the day. Different workweeks may be established for different employees or groups of employees. Normally, overtime pay earned in a particular workweek must be paid on the regular pay day for the pay period in which the wages were earned.

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These financial relationships support our content but do not dictate our recommendations. Our editorial team independently evaluates products based on thousands of hours of research. An employer may not retaliate8 against an employee for filing a complaint or instituting a proceeding based on the FLSA. Acts of retaliation include terminating employment, disrupting the workplace, threats, acts of physical violence, and constructive discharge.

Calculating Overtime Pay for Salaried Employees

Understanding the tax treatment of overtime pay is essential for managing your finances and avoiding unexpected tax bills. The California overtime law is among the most thorough in the country, and it’s meant to safeguard workers and give them equal pay for longer hours. As of 2025, these regulations retain the emphasis on decent work practices but include adjustments in wage rates and rules. It is very important for employees to know about California overtime laws in order to ensure their rights. An employee’s workweek is a fixed and regularly recurring period of 168 hours — seven consecutive 24-hour periods.

In particular, the new rules would have allowed more companies to offer flextime to their workers instead of overtime. The definition of exempt employees (ineligible for overtime) is regularly tested in the courts. A recent case is Encino Motorcars v. Navarro, which addresses the question of whether automobile dealer service advisors are eligible for overtime. Some employers offer the standard OT pay rate of time and a half (1.5), some a double time rate, and others have a unique rate.

• These are different than the regular-season rules, too, but after the epic Buffalo Bills and Kansas City Chiefs game a few years ago, the NFL made a change.
• A timesheet is the best way of reporting the working hours to the employer.
• Overtime Laws in the States – provides a clickable map that informs what the overtime laws are in each state.
• For instance, in Australia, some awards mandate double time for work on Sundays or public holidays.
• Employers must meet the executive employee test, the administrative employee test, or the professional employee test categories.

Though it initially ruled that overtime didn’t kick in until an employee had worked 44 hours a week, lawmakers amended the FLSA two years later to reflect the move to a 40-hour workweek, lowering the threshold for overtime pay. Time off in lieu (TOIL),1 compensatory time, or comp time is a type of work schedule arrangement that allows (or requires) workers to take time off instead of, or in addition to, receiving overtime pay. A worker may receive overtime pay plus equal time off for each hour worked on certain agreed days, such as public holidays. The FLSA, with some exceptions, requires bonus payments to be included as part of an employee’s regular rate of pay in computing overtime. Today, overtime compliance is managed by the federal and state branches of the U.S. Employees who are not paid proper overtime wages for hours worked can file an unpaid overtime claim with the local Department of Labor branch, who will work with the employer to ensure compliance with the law.

Overtime pay earned by one spouse could push the household into a higher bracket, increasing the tax rate applied to the combined income. For example, if one spouse earns $70,000 and the other earns $30,000, their combined income is $100,000. If overtime pay increases the total income to $110,000, the portion of earnings above the $100,000 threshold may be taxed at a higher rate. If you live in a state that imposes income taxes, your overtime pay will also be subject to state taxation. That said, the impact of overtime pay on your state tax liability depends on where you live and work.

Household Tax Brackets

They must be treated as a salaried employee, and must be paid in set portions, at set intervals. Exempt employees also need to do some type of white-collar work consisting of professional duties or administrative tasks. Under federal rules, time-and-a-half overtime rates apply when a nonexempt employee works more than 40 hours in a single workweek. For instance, overtime may accrue by the workday rather than the workweek or double-time rates may apply. The equation works regardless of how much overtime you offer your employees. The total pay for the week, including the additional payment for overtime, is subject to regular tax rates.

As a small https://www.pinterest.com/enstinemuki/everything-blogging-and-online-business/ business owner, you don’t want to run afoul of the FLSA’s overtime rules. Failing to pay overtime opens you up to lawsuits from current and former employees, and you could also be liable for the unpaid overtime. Overtime gets confusing when it comes to salaried versus hourly employees. When most people talk about overtime, it’s typically in the context of a 40-hour workweek paid on an hourly basis. Department of Labor’s Fair Labor Standards Act (FLSA) was passed in 1938.

To understand which employees are entitled to overtime pay, business owners must determine whether they’re categorized as exempt or nonexempt employees. The FLSA outlines how employers should classify employees; failure to correctly classify employees can result in costly penalties that can retroactively apply as far back as the employee’s hire date. In California, based on California Labor Code 1171, only an employment relationship is required for overtime rules to apply.

Overtime pay provides valuable financial rewards, but it’s important to understand how it affects your tax liability. While overtime earnings are taxed the same as regular income, the additional income can impact your federal and state taxes, Social Security and Medicare taxes, and eligibility for tax credits. By monitoring your earnings, adjusting your withholding, and seeking professional advice, you can effectively manage the tax implications of overtime pay and maximize the benefits of your hard work. Optima Tax Relief is the nation’s leading tax resolution firm with over $3 billion in resolved tax liabilities. It is subject to the same federal and state income taxes as standard wages. However, the additional income earned through overtime can have a significant impact on an employee’s overall tax liability.

• For instance, in the U.S., non-exempt employees are generally entitled to overtime pay for any hours worked beyond 40 in a workweek.
• The employer may also have to pay a “liquidated damages” penalty, often calculated as the amount of back wages owed.
• Overtime is a regulation of organized labor designed to help improve the working hours and working conditions of workers, and prevent exploitation by their employers.
• In Japan, the overtime rate increases 25% of the regular rate for work between 10 p.m.
• Work done on Saturdays, Sundays, holidays, and regular days of rest is not considered overtime unless the organization clearly states that in the employment contract.
• If the team kicking off to start the overtime period scores a safety on the receiving team’s initial possession, the team that kicked off is the winner.

Overtime pay refers to the additional compensation employees receive when they work more than the standard number of hours defined by their employer or labor laws. In the United States, the Fair Labor Standards Act (FLSA) generally mandates that non-exempt employees be paid at least 1.5 times their regular rate for hours worked beyond 40 in a workweek. If an employee earns $20 per hour and works 45 hours in a week, they’ll receive $20 per hour for the first 40 hours and $30 per hour for the additional 5 hours. Overtime is particularly common in industries like healthcare, retail, manufacturing, and transportation, where demand for services often requires employees to work extended hours. An employer who requires or permits an employee to work overtime is generally required to pay the employee premium pay for such overtime work. Employees covered by the Fair Labor Standards Act (FLSA) must receive overtime pay for hours worked in excess of 40 in a workweek of at least one and one-half times their regular rates of pay.