Tuesday, January 29, 2013

Overtime and the Salaried Employee

Ask yourself or your friend or any number of friends whether or not salaried employee's are entitled to overtime pay if they work longer than an eight hour day and the almost unanimous response is no.  Somehow this so called common knowledge has permeated through society so even high school students have heard of this concept and some may even believe it to be true.

Thankfully this common knowledge is incorrect in many instances.  California (Links to CA Dept of Industrial Relations) explicitly defines a work week at 8 hours in a day or 40 hours in a week, if either of these thresholds is crossed then California mandates they be paid at 1.5x their wage.  I believe this is one reason why many people think salaried employees are not entitled to overtime pay they do not think a salary is compatible with the idea of time and a half pay rate.

However, converting a salary to an hourly pay rate is rather simple. 
  1. Determine the weekly rate:  Divide the salary by number of weeks worked (Generally 52 for a full year).
  2. Now you take that number and divide it by 40 this will give you your regular rate of pay 
Example:  Employee is salaried at $36,000 and works for simplicity's sake 50 hours a week for 52 weeks.
  1. 36000 / 52 =  692
  2. 692 / 40 = 17  Meaning this employees average rate of pay is $17 an hour.
  3. 10 hours a week of overtime x 52 weeks = 520 hours at 25.50 per hour = $13,260 in unpaid overtime.  (This is a large amount of overtime that is very consistent resulting in a high number used for simplicity's sake your own situation would of course be different).
The bad news is there are some exemptions, the good news is that they are generally construed against the employer not the employee though I suggest contacting an attorney to review your situation if you feel you are being unfairly compensated.  Real situations are more complicated than the simple one I have illustrated here.

I hope this helps to educate people about the facts surrounding the rights of salaried employees in California.
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2 comments:

  1. UnknownFebruary 14, 2013 at 11:07 PM

    This was extremely informative. I'd be curious as to what percentage of the salaried population actually gets their rightful overtime pay.

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  2. UnknownFebruary 19, 2013 at 2:55 PM

    I don't have actual statistics on the percentage, however I would assume it is very low. The actual penalty in many cases is the back wages you were entitled to in the first place. Meaning if a company has 10 salaried employees who all work overtime, and only 2 or 3 of them find an attorney and recover their missing wages the company has still saved a ton of money by depriving the other 7 or 8 of their overtime.

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