Minimum Wage & Overtime Compliance

Overview

Wage and hour compliance governs how employees are paid, when overtime applies, and when meal and rest breaks must be provided.

Wage violations are among the most common and expensive claims brought against California employers. Even good-faith mistakes can result in back wages, penalties, and attorneys’ fees.


California Minimum Wage

As of January 1, 2025, California’s statewide minimum wage is $16.50 per hour.
Many cities and counties require a higher local minimum wage, which always controls.

Employers must pay the highest applicable rate, whether state or local.


Industry-Specific Minimum Wage Laws

Health Care Workers

Certain health care workers are subject to a higher minimum wage, depending on:

  • The type of health care facility

  • Whether the worker provides or supports health care services

  • The size or ownership of the facility

Covered workers may include both clinical and non-clinical staff (e.g., janitorial, clerical, food service).

Practical guidance: If you operate a health care facility or contract with one, confirm coverage before setting pay rates.

Fast Food Workers

  • As of April 1, 2024, covered fast-food restaurant employees must be paid at least $20.00 per hour.

  • This generally applies to limited-service restaurants that are part of a 60-location-plus nationwide chain, including franchises. Certain bakeries, grocery-based restaurants, and special venues are excluded.

Key Minimum Wage Rules to Remember

  • Minimum wage cannot be waived

  • Tips do not count toward minimum wage

  • Minimum wage applies even if you have only one employee


Overtime Compliance

Who Is Entitled to Overtime

Only non-exempt employees are entitled to overtime pay.

When Overtime Is Owed

Overtime must be paid when a non-exempt employee works:

  • More than 8 hours in a workday

  • More than 40 hours in a workweek

  • More than 6 days in a workweek


Overtime Rates

Time-and-a-Half (1.5× the regular rate)

  • All hours worked over 8 and up to 12 in a single workday

  • The first 8 hours worked on the 7th consecutive day in a workweek

Double Time (2× the regular rate)

  • All hours worked over 12 in a single workday

  • All hours worked over 8 on the 7th consecutive day in a workweek

    Practical Guidance: California overtime is based on daily hours, not just weekly totals.

Regular Rate of Pay (What Overtime Is Based On)

In California, overtime is not calculated using only an employee’s base pay. It is calculated using the employee’s regular rate of pay, which often includes additional earnings.

Hourly Employees

The regular rate of pay may include:

  • Hourly wages

  • Shift differentials (extra pay for nights, weekends, or special shifts)

  • Non-discretionary bonuses (bonuses promised in advance or tied to performance)

  • Commissions

Example

An employee earns:

  • $20/hour base pay

  • $2/hour night shift differential

  • A $100 non-discretionary bonus

  • 40 hours worked in the week

Regular Rate Calculation:

((20 × 40) + (2 × 40) + 100) ÷ 40 = $24.50/hour

Overtime must be paid using $24.50/hour, not $20/hour.


Salaried, Non-Exempt Employees

For salaried non-exempt employees, calculate the regular rate by:

  1. Taking the employee’s weekly salary, and

  2. Dividing it by the number of hours the salary is intended to cover (typically 40).

Example

An employee earns:

  • $1,200 per week

  • Salary intended to cover 40 hours

Regular Rate Calculation:

1,200 ÷ 40 = $30/hour

Overtime must be paid using $30/hour.


What Does NOT Count in the Regular Rate?

The following generally do not count toward the regular rate of pay:

  • Discretionary bonuses
    (e.g., surprise bonuses not promised in advance)

  • Reimbursements
    (mileage, phone, meals, travel expenses)

  • Gifts or holiday bonuses
    (not tied to performance or productivity)

  • Paid time off payouts
    (vacation, sick time, PTO)

  • True expense allowances

If a payment is not tied to hours worked, performance, or productivity, it usually does not count toward the regular rate.

Exempt Employees & Exceptions

Some employees may be exempt from overtime, but exemptions are:

  • Narrow

  • Based on actual job duties, not titles

  • Frequently misapplied

Misclassification is one of the most common wage-and-hour claims in California.

Recordkeeping & Payroll Practices

Employers should maintain accurate records of:

  • Hours worked

  • Wages paid

  • Overtime calculations

  • Meal and rest break compliance

Regular payroll audits help identify issues early and reduce liability.

Meal & Rest Break Compliance (Overview Only)

California law requires employers to provide compliant meal and rest breaks to non-exempt employees. These rules directly affect wage compliance because failures can result in premium pay penalties.


In general:

  • Non-exempt employees are entitled to unpaid meal periods and paid rest breaks based on hours worked.

  • Missed, late, or interrupted breaks can trigger one hour of premium pay per violation.

  • Premium pay must be included in wage calculations and final paychecks.

Important: Meal and rest break rules are a frequent source of California wage claims.

For detailed rules, waiver options, on-duty meal periods, and required documentation, see the “Meal & Rest Break Compliance” section of this Manual.

Key Takeaways

  • Always pay the highest applicable minimum wage

  • California overtime rules apply daily and weekly

  • Bonuses can increase overtime liability

  • Meal break compliance must be documented correctly

  • Industry-specific rules may override general rules