Your Legal Corner - Client Alert Blog

Overtime Compensation Agreements Are Void

Written By: Melissa C. Marsh, Esq., California Attorney, October 2012

California Labor Code §510 generally requires the payment of overtime to nonexempt employees for hours worked over 8 hours in a day, 40 hours in a workweek, and all hours on the seventh consecutive day of work. Calculating the overtime owed is relatively simple for nonexempt employees paid an hourly wage (1/40th of the employee's weekly salary); but not so easily computed for nonexempt employees paid a fixed salary. Consequently, many employers have entered into agreements with their salaried employees to the effect that an employee will work say 55 hours per week for a salary of "x." To restrict this practice, the California Department of Labor Standards and Enforcement invalidated such agreements and in its Enforcement Manual specifically stated that such agreements were illegal and void as a matter of law after the enactment of Labor Code §515.

In opposition to the DLSE's position, a California Court of Appeal in Arechiga v. Dolores Press, 192 Cal.App.4th 567 (2011) held that Labor Code §515 did not prohibit a written employment agreement that provided a non-exempt employee a salary based on more than 40 hours of work in a week.

In response to the Court's ruling, the California legislature passed Assembly Bill 2103 which adds new subsection (d)(2) to California Labor Code §515:

"payment of a fixed salary to a nonexempt employee shall be deemed to provide compensation only for the employee's regular, nonovertime hours, notwithstanding any private agreement to the contrary."

Thus, effective January 1, 2013, a fixed salary paid to a nonexempt employee may only include compensation for the employee's regular, non-overtime hours. The legislation invalidates any employment agreement to the contrary.

Tags:
Posted In: Employment Law News

Blog Categories:

Business Law Bulletin
Corporate Client Bulletin
Employment Law News
IP Bulletin
Real Estate Reporter
Tax Update

Search YLC Blog:

Subscribe to Updates:

Interested in receiving this blog? You may add this blog to your feeds by clicking here: Subscribe

Recent Updates:

Archives:

June 2022
May 2022
April 2022
August 2021
February 2021
September 2020
January 2017
June 2016
May 2016
March 2016
December 2015
June 2014
April 2014
February 2014
November 2013
October 2013
September 2013
November 2012
October 2012
July 2012
May 2012
April 2012
March 2012
January 2012
November 2011
July 2011
February 2011
November 2010
October 2010
September 2010
April 2010
February 2010
January 2010
November 2009
June 2009
May 2009
March 2009
February 2009
January 2009
October 2008
June 2008
December 2005

If you would like to inquire about my services, please call 818-849-5206.
If you have additional questions or need specific legal advice tailored to your specific needs, please schedule a low cost Telephone Consultation.

Disclaimer: The information presented on this web site was prepared by Melissa C. Marsh for general informational purposes only and does not constitute legal advice. The information provided in my articles and alerts should not be relied upon, or used as a substitute for professional legal advice from an attorney you retain to advise or represent you. Your use of this Internet site does not create an attorney- client relationship. Transmission of this article is not intended to create, and receipt of it does not constitute, an attorney-client relationship. All uses of the contents of this site, other than personal uses, are prohibited. You may print or email a copy of any information posted on this web site for your own personal, non-commercial, use, but you may not publish any of the articles or posts on this web site without the Express Written Permission of Melissa C. Marsh.

Located in Los Angeles, California, the Law Office of Melissa C. Marsh handles business law and corporation law matters as a lawyer for clients throughout Los Angeles including Burbank, Sherman Oaks, Studio City, Valley Village, North Hollywood, Woodland Hills, Hollywood, West LA as well as Riverside County, San Fernando, Ventura County, and Santa Clarita. Attorney Melissa C. Marsh has considerable experience handling business matters both nationally and internationally. We routinely assist our clients with incorporation, forming a California corporation, forming a California llc, partnership, annual minutes, shareholder meetings, director meetings, getting a taxpayer ID number (EIN), buying a business, selling a business, commercial lease review, employee disputes, independent contractors, construction, and personal matters such as preparing a will, living trust, power of attorney, health care directive, and more.