If your employer is changing the way you are paid from hourly to salary, your company may be violating wage and hour laws. Many employees in California believe that it is better to receive a salary as opposed to being paid on an hourly basis. After all, there is a stigma associated with using a punch clock and tracking all of the hours you work.
However, the truth is that it can be better to be paid on an hourly basis as opposed to a salary basis for one main reason: Overtime pay.
If you are paid on a salary basis, chances are that the company is also classifying you as exempt vs. non-exempt from overtime pay. Therefore, you are not paid overtime for working more than 8 hour days and/or 40 hour weeks. In turn, your total compensation can be significantly reduced.
So if it is better to be paid on an hourly basis, how can your employer change your pay from hourly to salary? The biggest misconception in California is that being paid a salary allows companies to avoid paying employees overtime compensation under the California Labor Code and/or Fair Labor Standards Act.
The truth is that paying an employee a salary only satisfies the first requirement of not paying the employee overtime wages. The second and more important requirement involves the employee’s job duties. What is the employee actually doing on a day to day basis?
For example, suppose you are an administrative employee and your company has changed the way you are paid from hourly to salary. In order to avoid paying you overtime, your primary job duty must involve using indpendent discretion and judgment as to matters of significance that affect the company as a whole. If you are not performing duties that affect that company as a whole more than 50% of the time, even though you are paid a salary, the employer is still required under California law to pay you overtime compensation for all hours worked in excess of 8 in a day or 40 in a workweek.
If your employer is changing the way you are paid from hourly to salary, it is important that you remain skeptical about the change in the way you are paid. Contact an experienced employment law attorney right away for free legal advice on your rights to fair pay and remember, being paid on a salary basis does NOT mean that your employer is allowed to not pay you overtime wages for working overtime hours.