Overtime Rights for Drivers and Outside Salespersons

Under California overtime laws, employees are entitled to make extra compensation for working: 

• Overtime for working more than 8 hours in a single workday


• Overtime pay for working more than 40 hours in a workweek under the FLSA


• Overtime pay for working 7 consecutive workdays 


•  Overtime pay for working more than 12 hours in a single day at double the regular rate of pay 

Many employers in California classify drivers as exempt from overtime pay, meaning that the employers fail to pay the drivers overtime wages. This can add up to a lot of unpaid wages if the drivers are working long hours. Under state overtime laws, when drivers deliver products in addition to selling product, the drivers are entitled to overtime pay unless their primary duty is actually making sales.

If you are an outside salesperson or a driver and not paid overtime wages, here are some factors you should look at to see if you are entitled to overtime wages under state labor laws and the Fair Labor Standards Act:

•  Is your primary duty actually making sales?


•  Compare drivers at your company making sales with other employees who make sales for the company


•  Look at whether there are set standards for the amount of products the drivers are required to deliver

Employees in California that are making outside sales and not supposed to be making overtime pay under state labor laws must be making the sales at the customer’s place of business as opposed to the employer’s business over the phone. Similarly, employees are entitled to overtime pay if they are making sales by mail or the internet.  Importantly, even if you work from home making sales you are not considered an outside salesperson but instead an inside salesperson and therefore unless at least fifty percent of your total income comes from commissions, you are entitled to overtime wages. 

Promotional work is usually not considered making sales for purposes of California overtime laws. According to the Department of Labor and the Division of Labor and Standards Enforcement, “Promotional work that is actually performed incidental to and in conjunction with an employee’s own outside sales or solicitations is exempt work” but promotional job duties that are performed incidental to the sales that another employee is going to make is not the type of work that disqualifies the employees from overtime pay and therefore the employees are entitled to overtime pay.

Want to know if Your Current or Former Employer Owes You Overtime Pay under California Overtime Laws?

Want to know if your current or former employer owes you money for failing to pay you the proper amount of wages as required by California law? Here are a few examples of the types of wage and hour schemes employers use to cheat employees out of wages:

Under labor laws, courts often find that employees have a valid wage and hour overtime law claim when employers use a flag rate or piece rate compensation scheme. In particular, employers often violate state labor laws by failing to pay workers for the time they spend attending meetings and training sessions. Furthermore, many California employers are liable to employees for penalties when the employer’s fail to pay for time spent setting up work stations and booting up and shutting down computers. 

Employers also frequently implement illegal comp time schemes. A comp time scheme is one where the employer fails to pay the employee overtime wages for working more than 8 hours in a workday or forty hours in a workweek because the employer tells the employee he or she can leave early the next day. For example, suppose an employee works 10 hours on Monday and the employer says you can leave two hours early tomorrow and we will mark the timekeeping system so that it looks like you worked two 8 hour days. Under California overtime laws, the employee is losing two hours of overtime pay because on Monday the employee should have been paid one and a half times the regular rate of pay for working hours 9 and 10.

Another major problem is that employers implement alternative workweek schedules without conducting a valid election process which violates the California labor law. These types of illegal employment practices often occur in the San Francisco Bay Area. 

Some illegal employment law practices in Southern California often involve failing to compensate employees for travel time and time spent working off the clock from home, sending emails and making phone calls. Not only is it against California labor laws to not pay employees for time worked from home when they are non-exempt, but employers must also reimburse employees for the work-related expenses as well. 

HERE ARE A FEW IMPORTANT CALIFORNIA LABOR CODE LAWS RELATING TO OVERTIME, WAGES AND HOURS OF WORK

Daily: Work in excess of eight hours in a workday shall be compensated at the rate of one-and-one-half times the regular rate of pay. Work in excess of 12 hours in a workday shall be compensated at the rate of double the regular rate of pay.

Weekly: Any work in excess of 40 hours in any workweek shall be compensated at the rate of one-and-one-half times the regular rate of pay.

Seventh consecutive workday: The first eight hours of work on the seventh day of work in any workweek shall be compensated at the rate of one-and-one-half times the regular rate of pay, regardless of the number of hours worked during the previous six days. Every hour worked after eight hours on the seventh consecutive workday in any workweek is paid at double the regular rate of pay.

Makeup time: If an employer approves an employee's written request to make up work time that is or would be lost as a result of a personal obligation of the employee, the hours of the makeup-work time may not be counted towards computing the total number of hours worked in a day for purposes of daily overtime, except for hours in excess of 11 per day or 40 per week. This applies only if the makeup time hours are performed in the same workweek in which the work time was lost.

Amount of Overtime Pay

The overtime pay rate is one-and-one-half times the regular rate of pay for work in excess of eight hours per day or 40 hours per week and for the first eight hours worked on the seventh consecutive workday; two times the regular rate of pay for work in excess of 12 hours per day or in excess of eight hours on the seventh consecutive workday.

California Employment Laws and Labor Rights

General Requirements for the Executive Exemption
Under California labor laws and employee rights, all employees are entitled to overtime pay for working more than 8 hours in a workday or 40 hours in a workweek. The burden is on the employer to prove that the employee meets the test of one of the exemption in order to not pay the worker overtime wages. In this post I will discuss the executive exemption which allows employers to deny employee wage and hour rights.
Executive employees are exempt under only if they:

•  Receive a salary of at least $455 per week ($380 weekly if employed in American Samoa by an entity other than the federal government), exclusive of board, lodging, or other facilities;
• Have the primary duty of managing the enterprise in which they are employed, or a customarily recognized department or subdivision thereof;
• Customarily and regularly direct the work of two or more employees; and, 
• Have the authority to hire or fire other employees or make suggestions and recommendations that are given particular weight about hiring, firing, advancement, promotion, or other changes in status.

Primary Duty of Managing
An executive employee’s “primary duty" is” the principal, main, major or most important duty that the employee performs. An employee can only have one primary duty and it is determined on a case-by-case basis, focusing on the character of the employee’s job as a whole. In determining whether workers are entitled to overtime wages A court will look at the percentage of time that the employee spends performing exempt work.

Employees will generally satisfy the primary duty requirement only if he or she spends more than 50% of the time performing exempt job duties. Generally, exempt executives make their own decisions regarding when to perform nonexempt duties, and remain responsible for the success or failure of business operations under their supervision while they perform such tasks. In contrast, a nonexempt employee who does not make overtime pay may be directed by a supervisor to perform exempt work, or may perform exempt work only for a defined period of time.

Employees whose primary duties are ordinary production work or routine, recurrent, or repetitive tasks cannot qualify for the executive exemption. Assistant managers in retail establishments can perform nonexempt work such as serving customers, cooking food, stocking shelves, or cleaning and still be considered exempt executives, but only if they are performing managerial work more than 50% of the time. In contrast, relief or working supervisors whose primary duties are the performance of nonexempt work, such as on a production line in a manufacturing plant, do not become exempt merely because they occasionally have some responsibility for directing the work of other employees when the supervisor is unavailable.

Department or Subdivision Requirement
A customarily recognized department or subdivision, as opposed to a collection of temporarily assigned employees, must have permanent status and a continuing function. Where an enterprise has more than one establishment, the employee in charge of each establishment may be considered in charge of the recognized subdivision. Recognized departments or subdivisions need not be physically within the employer’s establishment, and may move from place to place. Thus, employees who work in more than one location can still be exempt executives if other factors show they are actually in charge of a recognized unit with a continuing function in the organization. Similarly, continuity of subordinate employees is not essential to the existence of a recognized unit with a continuing function. The exemption can apply to supervisors who draw employees from a pool, or supervise a team of workers drawn from other departments.

Two or More Employees Element
Exempt executives must direct the work of two or more full-time employees, or the equivalent, as part of their customary and regular duties. Supervision can be distributed among more than one executive employee, but to qualify for the exemption, each executive must customarily and regularly direct the work of two or more full-time or equivalent employees.

For example, a department with five full-time, nonexempt employees can have up to two exempt supervisors if each directs the work of at least two of those employees. An employee who merely assists a manager, or performs supervisory functions only on an occasional basis, is not an exempt executive. In counting the number of employees supervised, hours worked cannot be credited more than once for different supervisors, so shared responsibility for employees in the same department does not satisfy the requirement. However, when an employee works a specific number of hours for one supervisor and the rest for another supervisor, the work hours can properly be apportioned among the supervisors.

Authority to Hire and Fire
California labor laws require that exempt executives have the authority to hire or fire employees, or have particular weight given to their suggestions and recommendations as to the hiring, firing, advancement, promotion, or other change of status of other employees.

Factors considered when determining whether an executive’s suggestions and recommendations are given " particular weight" include whether making such suggestions and recommendations is part of the job, how often the executive makes such suggestions and recommendations, and how often management acts upon them. Generally, such suggestions and recommendations must pertain to employees the executive customarily and regularly directs.

An executive’s suggestions and recommendations can have “particular weight" even if they can be overruled by a higher level manager and the executive does not have authority to implement the suggestion or recommendation. Retail assistant managers were considered exempt executives where their suggestions and recommendations for hiring, retention, and promotion were given particular weight and the store managers frequently approved the recommendations because they trusted the assistant managers’ judgment.

Contact an experienced employment law lawyer today to learn more about whether or not you are exempt from overtime pay.

FEDERAL OVERTIME LAWS: HOLIDAY & VACATION PAY

The Fair Labor Standards Act provides that the term "regular rate" shall not include "payments made for occasional periods when no work is performed due to vacation, holiday, illness, failure of the employer to provide sufficient work, or other similar cause …."

This provision deals with the type of absences which are infrequent, sporadic or unpredictable. It has no relation to "regular absences" such as lunch periods nor to regularly scheduled days of rest. Sundays may not be workdays in a particular plant, but this does not make them either "holidays" or "vacations," or days on which the employee is absent because of failure to provide sufficient work. The term refers to those days customarily observed in the community in celebration of some historical or religious occasion; it does not refer to days of rest given to employees in lieu of or as an addition to compensation for working on other days.

The term "other similar cause" refers to payments made for periods of absence due to factors like holidays, vacations, sickness and failure of the employer to provide work. Examples of "similar causes" are absences due to jury duty, attending the funeral of a family member or inability to reach the workplace because of weather conditions. Only absences of a nonroutine character which are infrequent or sporadic or unpredictable are included in the "other similar cause" category.

The computation of overtime pay in holiday workweeks is governed by these rules:

(1) So-called "idle" holiday and vacation pay—money an employee receives whether he works or not—need not be included in figuring the regular rate. It may not, however, be offset against overtime pay due under the Act;

(2) Straight time pay which an employee receives for working on the holiday or vacation must be included in figuring the regular rate and it may not be offset against overtime pay due under the Act.

(3) Premium payments of at least an extra half-time which an employee receives for time worked on the holiday may be excluded in figuring the regular rate and may be offset against overtime pay due under the Act;

(4) A total payment of time and a half or more of the regular rate which an employee receives when he or she works on a holiday or vacation will be regarded as pay for time worked, even though the employee would have received straight time if the employee had not worked on the holiday. Thus, the straight time would have to be included in the regular rate. The extra half-time, however, may be excluded in figuring the regular rate and may be offset against overtime pay due under the Act.

However, care should be taken on how the pay plan is structured. If an employee is entitled to holiday or vacation pay even if the employee works that period, that pay cannot be used to meet the requirement that the premium pay equals or exceeds one and one-half times the regular rate.Thus, if an employee is entitled to vacation pay regardless of whether the employee works or not and the employee receives straight time pay, the employer must pay overtime when the employee works on the straight time pay.

EXAMPLES OF CALCULATING VACATION PAY

Example (1): An employee whose rate of pay is $5 per hour and who usually works a 6-day, 48-hour week is entitled, under an employment contract, to a week's paid vacation in the amount of the usual straight time earnings ($5 × 48 = $240). The employee foregoes a vacation and works 50 hours during that week. The statutory workweek is 40 hours.

$240.00 = Vacation pay

$250.00 = Regular pay ($5 regular rate × 50 hours worked)

$ 25.00 = Overtime pay ((½ × $5) × 10 overtime hours)

$515.00 = Total Compensation Due

The regular rate of $5 per hour is not increased by adding the $240 vacation pay into its computation, and no part of the $240 may be used to offset the statutory overtime compensation which is due. There is no statutory right to the $240 vacation pay or any other sum as vacation pay. This is a matter of private contract.

Example (2): The same employee in Example (1) above is entitled under a contract to 8 hours of pay at a regular rate of $5 per hour for the Christmas holiday. The employee foregoes the holiday and works 9 hours on that day. During the entire week the employee works 50 hours.

$ 40.00 = Idle holiday pay ($5 × 8 hours)

$250.00 = Regular pay ($5 × 50 hours worked)

$ 25.00 = Overtime pay ((½ × $5) × 10 overtime hours)

$315.00 = Total compensation due

The regular rate of $5 was not increased by adding the $40 holiday pay to the computation. No part of the $40 may be used to offset the statutory overtime compensation due.

[If the employment lawyers are not entitled to holiday or vacation pay when they work on those days, then the premium pay received for work on those days is excludable from the regular rate and credited towards overtime pay

Example (3): Same employee in the above examples except that, under the contract, the employee is only entitled to holiday pay when no work is performed. If the employee is required to work on the holiday, instead of receiving the holiday pay he or she receives a premium rate of $7.50 (time and a half) for each hour worked on the holiday. The employee works 9 hours on the holiday and 50 hours during the week.
$250.00 = Regular pay (50 hours × $5) 

$ 25.00 = Overtime pay (10 hours × (½ × $5))

$ 22.50 = Holiday premium (9 hours × ($7.50−$5))

The employer is able to take credit for the holiday premium against the overtime premium and the employee is only due $2.50 for overtime ($25 overtime − $22.50 holiday premium). The straight time vacation pay ($9 hours × $5 = $45) is not included in the regular rate or credited against the overtime premium. Thus, the employee is paid as follows:

$250.00 = Regular pay

$ 22.50 = Holiday premium

$ 2.50 = Overtime pay due ($25 overtime − $ 22.50 premium)

$ 45.00 = Holiday straight time

$320.00 = Total Compensation Due

The statute does not require premium pay for a holiday. Since the holiday premium is one and one-half times the established rate for nonholiday work, it does not increase the regular rate because it qualifies as an overtime premium under Section 7(e)(6), and the employer may credit it toward the statutory overtime compensation due.

Example (4): Same employee as in the above examples, except that the contract calls for $10 (double time) for each hour worked on the holiday.

$250.00 = Regular pay ($5 × 50 hours worked)

$ 25.00 = Overtime pay (10 hours × (½ × $5)) 

$45.00 = Holiday premium (9 hours × ($10−$5)) 

The employer is able to take credit for the holiday premium against the overtime pay, so no additional overtime is due ($45 premium > $25 overtime). Thus, the employee is paid as follows:

$205.00 = Regular pay ($5 × 41 nonholiday hours)

$ 90.00 = Holiday pay (9 hours × $10)

$295.00 = Total Compensation Due

Since this holiday premium qualifies under Section 7(e)(6), it is excludable from the computation of the regular rate and may offset against overtime compensation due.

In distinguishing Examples (3) and (4) from Examples (1) and (2), it should be noted that the correct provisions in Examples (1) and (2) called for holiday pay whether the employee worked or not. In Examples (1) and (2), the employee received some pay attributable to the holiday, whether he or she worked or not, and some pay at a nonholiday rate for hours worked on the holiday. In Examples (3) and (4), all the premium pay the employee received for working on the holiday (even though it is double time) was directly attributable to work performed on the holiday.The payment of an additional hour's pay to employees who work a seven-hour shift at the beginning of the change to daylight savings time is treated as a holiday hour and need not be counted as part of the regular rate of pay for overtime purposes. This amount, however, cannot be credited toward any overtime compensation due for the week. But at the end of the daylight savings period, employees working the nine-hour shift are entitled to overtime on the basis of all hours worked in the workweek, including the extra hour worked during the time change

California Overtime Calculation Rules

Employees within the general coverage of the Fair Labor Standards Act (FLSA) and who are not specifically exempted from the overtime requirements must be paid time and one-half the regular rate for all hours worked in excess of the weekly maximum. Each workweek is a separate unit for overtime purposes; hours may not be averaged over two or more weeks.This is another common misconception of employers.

The FLSA Amendments of 1985 provide for special rules for state and local government employees concerning overtime and compensatory time. There are substantial variations in the way the FLSA now treats private sector versus public sector employees. In the private sector, there is no such thing as swapping overtime pay for "comp time" for nonexempt employees.

Where an employee is paid a flat hourly rate with no incentive bonus or other additional compensation, the employee's hourly rate is the regular rate of pay. In order to compute overtime, the employee's pay must be converted to an hourly rate (i.e., the regular rate) and then paid at one and one-half times the regular rate for all hours worked over 40.