When Do You Owe Overtime?

When you owe overtime (and at what rate)

Federal law requires 1.5× pay for any hour worked beyond 40 in a week. That applies in every state. Some states add stricter rules — California, Alaska, Nevada, Colorado, and Kentucky have the main general rules, while Oregon, Connecticut, and a few others add industry-specific rules. California is by far the strictest: 1.5× after 8 hours/day, 2× after 12, and 1.5× or 2× on the 7th consecutive day.

The biggest exposure isn't the rate; it's misclassification. Calling an employee "salaried" doesn't make them exempt — federal law requires both a minimum salary AND specific job duties (real authority, independent judgment) for the exemption to apply. A "manager" who doesn't hire or fire anyone owes back overtime for every week over 40 hours. One misclassified position usually means dozens of employees with years of back-pay.

How to set up overtime tracking that holds up

• Audit every salaried "exempt" position — confirm the duties test, not just the salary.
• Pay 1.5× for every hour over 40 in a week — universal federal rule.
• For California employees, add daily overtime (1.5× after 8 hours, 2× after 12).
• Never offer "comp time" instead of overtime pay — illegal in the private sector.
• Include bonuses, commissions, and shift differentials in the overtime rate.

Where overtime mistakes turn into class actions

• Calling a coordinator "salaried exempt" when they just process paperwork — fails the duties test, owes back overtime.
• Applying federal-only rules to a remote employee in California — owes daily overtime for every 9+ hour day.
• Offering "comp time" to private-sector employees instead of paying overtime — each missed payment, each employee, each workweek is its own violation.
• Paying overtime on the hourly base only, ignoring a production bonus — every week with the bonus is miscalculated.

When in doubt, pay overtime

Misclassification is the #1 overtime lawsuit, and the cost compounds fast. If you can't confidently say a salaried employee both earns the federal salary minimum AND performs real managerial duties — pay overtime. Overpaying costs little; misclassifying a whole position costs years of back-pay times every affected employee.