California's Agricultural Employee Overtime Phase-In Thresholds Are Now in Effect

Over two years ago, California passed the Phase-In Overtime for Agricultural Workers Act of 2016, which required a modification of Industrial Welfare Commission Order No. 14-2001 ("Wage Order No. 14") to create a schedule that phases in for agricultural employees covered by that wage order the same overtime requirements that apply to all California hourly employees –i.e., one and one-half times the regular rate for all daily overtime after eight hours per day, weekly overtime after 40 hours per week, and seventh consecutive day overtime after the first eight hours on the seventh consecutive day of work in a workweek; and double time after 12 hours per day, and after eight hours on the seventh consecutive day of work in a workweek. See our prior advisories here and blog entry here.

The new overtime pay requirements went into effect on January 1, 2019 for employers with 26 or more employees and will continue phasing in through January 1, 2022, when agricultural employees will reach the same overtime pay entitlement as other California hourly employees. Employers with 25 or fewer employees have an additional three years to comply with the new requirements, also on a phase-in basis over a period of three years (January 1, 2022 to January 1, 2025).

Schedule of Overtime Pay for Agricultural Employees

Unchanged in Wage Order No. 14 is the requirement of overtime pay on the seventh consecutive day of work in a workweek, regardless of employee size: (i) overtime at one and one-half times the employee's regular rate of pay for the first eight hours of work on the seventh consecutive day of work in a workweek; and (ii) double time after eight hours on the seventh consecutive day of work in a workweek.

The Labor Commissioner's Office has posted Frequently Asked Questions to provide additional guidance as agricultural employers adapt to the overtime phase-in requirements.

The FAQ states that the "same counting method used to determine the appropriate minimum wage rate" applies to determining employer size for the overtime phase-in. See here for guidance from the Labor Commissioner on the minimum wage requirements, which states that an employer, "who obtains workers through a staffing agency, labor contractor, or other arrangement should aggregate and count such workers, along with other direct hire workers, as employees for purposes of determining the applicable minimum wage rate."

See our prior advisory here for guidance about certain employees covered by California Wage Order No. 13, which regulates wages, hours, and working conditions in the industries preparing agricultural products for market on the farm, rather than Wage Order No. 14, which regulates wages, hours, and working conditions in the agricultural occupations.

Guidance for Employers of Agricultural Employees Covered by Wage Order No. 14

1. Review your pay policies and practices and update them as necessary.
2. Audit payroll to confirm it is capturing all circumstances triggering overtime – i.e., daily, weekly, double time, and seventh consecutive day in a workweek.
3. Confirm that the overtime and double time rates of pay are correct, to the extent that nondiscretionary incentive payments must be included. See our prior advisory here.
4. Confirm your organization is applying the correct California Wage Order to employees, as certain Wage Orders do not have phased-in relaxed overtime requirements like Wage Order No. 14.
5. If your organization uses a third party vendor to conduct payroll, confirm that the payroll company is using the new thresholds for overtime pay determinations.
6. Consider whether to change employees' schedules if the new overtime thresholds are burdensome for your company's labor budget.
7. Train managers on the new overtime thresholds and provide guidance to them regarding the circumstances under which non-exempt employees are permitted to work overtime, to help manage your company's labor budget.