How to Calculate Overtime When both Daily and Weekly Overtime Hours Worked in the Same Week

The following post is written in a Q & A format and is intended to explain employers and employees California overtime law for computing daily and weekly overtime hours for non-exempt employees. It appears there is a misunderstanding as to the correct method of calculating  overtime hours for certain workweeks during which employee’s work hours exceed both the 8-hour daily and 40-hour weekly thresholds.

I. Question

I work for a company, ABC, Inc. as a delivery driver. The Company requires me to work long hours, sometimes 6 or 7 days per week. For example, last week, I worked six 10-hour shifts and one 14-hours shift. I would like to know whether I am entitled to be paid overtime rates for hours exceeding the daily 8-hour limit and then to count those same hours toward the weekly overtime hours.

II. Short Answer

No. California overtime law explicitly provides that overtime pay should not be duplicated or “pyramided” under the daily and weekly overtime provisions. To avoid pyramiding or duplication of overtime pay for the same hours of work, the Division of Labor Standards Enforcement and the Wage and Hour Division provide that the employee must be paid overtime for all hours in the workweek in excess of the applicable daily maximum or in excess of the applicable weekly maximum, whichever the number of hours is greater. Basically, there is no “pyramiding” of separate forms of overtime pay for the same hours worked. Once an hour worked is paid at the applicable daily overtime rate, that same hour cannot be used in the computation of forty hours for the purposes of weekly overtime pay.

 California and Federal Overtime Laws

For your convenience, I set forth all applicable federal and California laws that govern employer’s duty to pay overtime:

California Overtime Laws

California Labor Code section 510 and applicable Industrial Welfare Commission Wage Orders require employers to pay:

1)      One and one-half of employee’s regular hourly rate for:

a.      all hours worked in excess of 8 hours up to and including twelve (12) hours in any workday ;

b.      for the first eight (8) hours worked on the seventh (7th) consecutive day of work in any workweek;

c.       all hours worked in excess of 40 hours in any one workweek.

2)      Double of employee’s regular hourly rate for:

a.      all hours worked in excess of 12 hours per workday;

b.      all hour worked in excess of eight (8) hours on the seventh (7th) consecutive day of work in a workweek.  

Federal Overtime Laws

Under the applicable section of the Fair Labor Standards Act (29 U.S.C. § 207), employers are required to pay overtime to all non-exempt employee overtime compensation for work performed in excess of forty hours per week.

California and Federal overtime laws substantially vary from each other in that California’s Labor Code section 510 imposes much stricter overtime requirements on California employers.

Pyramiding of Daily and Weekly Overtime Is Not Allowed under California Law.

It is crucial to keep in mind that under the California Labor Code section 510, there are two forms of overtime: (1) daily overtime and (2) weekly overtime.

When an employee works only in excess of the weekly or the daily number of straight-time hours, the overtime hours are simply the number of excess hours worked. Thus, for example if an employee works only a singled day of ten hours in a workweek, the employee is owed eight hours straight-time pay and two hours of overtime pay for the workweek. Similarly, an employee who works six eight-hour days in a workweek for a total of 48 hours must be paid 40 hours at straight-time pay and eight hours of the applicable overtime rate. (Wage and Hour Manual for Cal. Employers, (4th ed. 1988) § 8.15(a), pp. 272-273.))

Calculations become a little bit more complicated, when an employee works in excess of both the daily and the weekly maximum hours standards in the same workweek. As more fully explained below, California overtime law explicitly provides that overtime pay should not be duplicated or “pyramided” under the daily and weekly overtime provisions. To avoid pyramiding or duplication of overtime pay for the same hours of work, the Division of Labor Standards Enforcement and the Wage and Hour Division provide that the employee must be paid overtime for all hours in the workweek in excess of the applicable daily maximum or in excess of the applicable weekly maximum, whichever the number of hours is greater.  For example, if the employee’s total hours of work in the workweek that exceed the daily maximum are then and the number of hours in excess of the weekly maximum are eight, overtime compensation is required for ten hours, not eight. The determination must be made at the end of the week. (Wage and Hour Manual for Cal. Employers, (4th ed. 1988) § 8.15(a), pp. 272-273.))

Specifically, California Legislature, California Division of Labor Standards Enforcement and California courts have already addressed the issue of “pyramiding” daily and weekly overtime by taking a position that employers should not be subjected to doubled-up overtime compensation requirements in section 510.

California Legislature Does not Require Pyramiding.

In enacting Labor Code section 510, the California Legislature expressly prohibited requiring an employer to “pyramid,” or pile premium compensation on top of premium compensation. Labor Code section 510 (a) provides in relevant part:

“Nothing in this section requires an employer to combine more than one rate of overtime compensation in order to calculate the amount to be paid to an employee for any hour of overtime work.”

California Courts Do not Require Pyramiding.

Analogously, California courts have also held that an employer is not required to combine more than one rate of overtime compensation to determine the amount to be paid for any hour of overtime work. DeYoung v. City of San Diego (1983) 147 Cal.App.3d 11, 18-19; Koebke v. Benardo Heights Country Club (2005) 36 Cal.4th 824, 840.; People v. Giordano (2007) 42 Cal.4th 644, 659.

For example, in Monzon v. Schaefer Ambulance Service, Inc. (1990) 224 Cal.App.3d 16, the court discussed whether pyramiding overtime compensation is permitted under Industrial Welfare Commission wage orders relating to overtime compensation. The issue was how to calculate overtime when an employee worked both more than 8 hours in a day and more than 40 hours in a week. The Court reached the same result as the Legislature required in Labor Code section 510, holding that “the proper method to use in calculating overtime is one in which the employer must identify at week’s end all hours worked by an employee during that workweek and pay overtime based upon the excess of total hours over the greater of either: (1) eight hours in a workday, including double time, or (2) forty hours in a workweek.” Id.

The California Division of Labor Standards Enforcement Does not Require Pyramiding.

The Division of Labor Standards Enforcement, charged with administration and enforcement of wage orders, also takes a position that there is no “pyramiding” of separate forms of overtime pay for the same hours worked.

In its December 23, 1999 Memorandum entitled “Understanding AB 60: An In Depth Look at the Provisions of the “Eight Hour Day Restoration and Workplace Flexibility Act of 1999,” (“Memo”) the DLSE explained “once an hour is counted as an overtime hour under some form of overtime, it cannot be counted as an hour worked for the purpose of another form of overtime. When an employee works ten hours in one day, the two daily overtime hours cannot also be counted as hours worked for the purpose of weekly overtime.”

The DLSE’s memo includes the following example: An employee works 12 hours on Monday, Tuesday, Wednesday, and Thursday. How many non-overtime and overtime hours did the employee work that week?

Answer: The employee is credited with 4 hours of daily overtime each day worked, for a total of 16 daily overtime hours, and these daily overtime hours cannot be counted for the purpose of determining when to start paying time and a half for hours worked in excess of 40 in a week. Because pyramiding is not allowed, there are no weekly overtime hours, even though the employee worked 48 total hours during the workweek. Only 32 of these hours were regular, nondaily overtime hours, and they are the only hours that count towards weekly overtime computations.

Computation Example

Below is a table showing our hypothetical employee’s work hours. The Company’s workweek starts on Monday and ends on Sunday.

We will follow  a 4-step process for computing the employee’s correct overtime hours. First, we calculate the employee’s weekly overtime hours, we then calculate his daily overtime hours. As a third step, we select the greatest number (either weekly or daily overtime hours) as the employee’s total compensable overtime. Finally, we determine whether the employee worked any hours in excess of 12 hours per day which shall be paid at double time.

As you can see, the employee worked a total of 74 hours.  We now compare both weekly and daily overtime and select whichever the number is greater. There are 34 weekly overtime hours (74-40=34) and a total of 26 daily overtime hours (10-8=2; 10-8=2; 10-8=2; 10-8=2; 10-8=2; 10-8=2; 14 hours on Sunday since it triggers the 7^th day rule). Thus, as noted above, our hypothetical employee is entitled to 34 hours of overtime pay, because the weekly is greater than daily overtime hours ( 34 > 26) . However, 6 of the 34 hours must be paid at double time because on Sunday, which was a seventh consecutive day, the employee worked 6 hours in excess of 8 hours in a workday (14-8=6).

Consequently, the employee entitled to pay for 74 hours of which 28 hours will be paid at time and one-half and 6 hours at double time.