California Wage and Hour Laws

An Overview

California has some of the most employee-friendly wage and hour rules in the country. As most employers know, not complying with these laws can lead to significant liability. California employers should ensure that they are not only complying with the applicable minimum wage and overtime requirements, but also with all other applicable laws related to the payment of wages.

Minimum Wage

The Fair Labor Standards Act (FLSA) currently only requires that employers pay employees $7.25 per hour for every hour worked. California’s current minimum wage is much higher, at $16.50 per hour for all employers, regardless of employer size. Additionally, certain industries have higher minimum wage requirements:

• Fast Food Workers: Effective April 1, 2024, covered “fast food restaurant employees” must be paid at least $20.00 per hour.

• Healthcare Workers: Effective October 16, 2024, covered healthcare facility employees must be paid the applicable higher rates, as established under the new Healthcare Worker Minimum Wage law. 

Working time

Similar to the FLSA, California wage and hour laws require that employees be paid for all “working time.” However, employers should be familiar with California’s requirements, which differ in several ways from the federal standard.

Local Minimum Wage Rates

Many California cities and counties set minimum wages higher than the state rate. Employers must pay the higher applicable rate. As of 2025, the following localities maintain their own minimum wage ordinances:

Belmont, Berkeley, Burlingame, Cupertino, Daly City, East Palo Alto, El Cerrito, Emeryville, Foster City, Fremont, Half Moon Bay, Hayward, Los Altos, Los Angeles, Los Angeles County (unincorporated), Malibu, Menlo Park, Milpitas, Mountain View, Novato, Oakland, Palo Alto, Petaluma, Redwood City, Richmond, San Carlos, San Diego, San Francisco, San Jose, San Leandro, San Mateo, Santa Clara, Santa Monica, Santa Rosa, South San Francisco, Sunnyvale, West Hollywood.

Employers must regularly check both state and local wage postings to confirm the correct rate.

Overtime

In addition to California’s more expansive minimum wage protections, California’s overtime rules are similarly more favorable to the employee. Employees must receive:

• 1.5 times the regular rate of pay for hours worked over 8 in a day, 40 in a week, and for the first 8 hours on the seventh consecutive workday in a workweek.

• 2 times the regular rate of pay for hours worked over 12 in a day, or over 8 on the seventh consecutive workday in a workweek.

Regular Rate vs. Hourly Rate

A common mistake is assuming overtime is simply 1.5x (2x) the employee’s base hourly wage. Similar to the FLSA, California law requires overtime to be calculated using the “regular rate of pay”, which includes:

• Base hourly wages

• Non-discretionary bonuses

• Piece-rate earnings

• Commission and incentive pay

Discretionary bonuses (such as holiday gifts) do not need to be included, but almost all other incentive-based compensation must be factored into determining the regular rate applicable to the workweek in which the overtime obligations accrue. 

Example of Overtime Calculation

Suppose an employee earns:

• $20/hour base wage

• $100 non-discretionary bonus in the week

• Works 50 hours in that week, including 10 hours of overtime (with 2 of those hours exceeding 12 in a day, so “double-time” applies).

Step 1: Calculate total straight-time earnings before OT:

• 50 hours × $20 = $1,000

• Piece Rate Bonus* = $100

• Total = $1,100

Step 2: Determine regular rate:

• $1,100 ÷ 50 hours = $22/hour (the “regular rate”).

Step 3: Apply OT multipliers to OT hours worked:

• 8 regular OT hours × .5 × $22 = $88

• 2 “doubled” OT hours × $22 = $44

Step 4: Add all together:

• Straight time: $1,000 (straight-time wages already paid for all 50 hours)

• $100 (piece rate bonus)

• Regular OT premium pay: $88

• “Double” OT pay: $44

• Total = $1,232

This example shows how bonuses and incentive pay must be included in the calculation, and how both 1.5x and 2x overtime rates can apply.

Exemptions

Certain employees may be “exempt” from minimum wage and overtime laws. Similar to the FLSA, California law recognizes the traditional “white collar”—executive, administrative, and professional employees—but applies stricter duties tests and salary thresholds. Employers must:

• Pay exempt employees on a salary basis that meets California’s minimum salary threshold.

• Confirm that job duties meet California’s narrower exemption criteria.
  Improper classification is one of the most common and costly wage and hour mistakes.

Beyond Minimum Wage and Overtime

California’s “Wage & Hour” laws and regulations are much more expansive than minimum wage and overtime requirements. Employers should ensure that they understand and properly comply with all such requirements, including, but not limited to, the below requirements:

• Meal and Rest Breaks: Employers must provide duty-free meal and rest periods, or pay a penalty of one additional hour of wages for each day the breaks are not provided.

• Paid Time Off (PTO): Employers must follow California’s strict rules regarding accrued vacation and PTO, which differ significantly from federal law.

• Paid Sick Leave: California has statewide and local sick leave laws that require employers to provide a minimum level of paid sick leave, available for a wide range of qualifying reasons. 

• Payment of Wages: California regulates when wages must be paid during employment (e.g., twice monthly) and at termination (final pay is due immediately or within very short timelines). Waiting time penalties can apply for late payments.

• Commissions: Employers must provide a written commission agreement, signed by the employee, and ensure that commissions are calculated and paid on the schedule required by law.

• Tips: Tips are the property of employees and may not be used to offset minimum wage obligations. California does not permit a “tip credit” against wages.

• Alternative Workweek Schedules (AWS): Employers may adopt an AWS (e.g., four 10-hour days) only through a formal, employee-approved process that must meet specific legal requirements.

• Recordkeeping and Wage Statements: Employers must maintain accurate time and payroll records and provide itemized wage statements with detailed information each pay period.

• Expense Reimbursement: Employers must reimburse employees for all necessary business expenses, including costs for required equipment, uniforms, or personal phone use for work purposes.

• Travel and On-Call Time: Many forms of travel, waiting, and on-call time count as “hours worked” and must be compensated.

Consequences of Non-Compliance

Wage and hour violations expose employers to:

• Back wages for unpaid minimum wage, overtime, and break premiums.

• Waiting time penalties of up to 30 days’ pay for failure to timely pay final wages.

• Civil penalties and interest, including claims brought under the Private Attorneys General Act (PAGA).

• Class action lawsuits that can multiply liability.

• In some cases, personal liability for business owners or managers.

Need Help Navigating California Wage & Hour Laws? Chapman Legal Can Guide You

California’s wage and hour requirements are highly technical, and even minor mistakes can lead to costly claims. Employers should regularly review payroll practices and policies to ensure compliance. If you need guidance on updating your wage and hour policies, conducting a compliance audit, or defending against a claim, contact Chapman Legal today to protect your business.

*In the event that an employee is paid a flat-sum (fixed) bonus, the flat-sum bonus must be factored into the calculation of the regular rate of pay for overtime purposes by dividing the bonus amount by the total number of non-overtime hours actually worked during the relevant pay period. (See Alvarado v. Dart Container Corp. of California, 4 Cal. 5th 542). If you have questions about how to calculate the regular rate in a situation involving a flat-sum bonus, contact Chapman Legal.