To Members of the Industrial Welfare Commission:
As you undoubtedly are aware, in AB 398 I proposed conforming California's daily overtime requirements with federal law under the Fair Labor Standards Act (FLSA). Presently, California is one of only four states to require employers to pay an overtime premium after employees (except in agriculture) work eight hours in a day. Other than California, only Alaska, Nevada, and Wyoming require daily overtime -- and not in such a stringent manner as California.
The FLSA, and the 46 other states whose laws and regulations conform with it, requires payment of overtime only after 40 hours have been worked in one week. California's more stringent overtime requirements weaken our state's competitiveness with other states. They also deter employers from offering employees flexible working schedules. In California, we have more and more families with both parents working full-time or single parents working full-time while endeavoring to balance their work and family responsibilities. We also have seen the benefits of flexible work schedules in alleviating commuter congestion on highways by staggering commute times.
As the Assembly hearings on AB 398 demonstrated, many employees want flexible schedules and many employers would like to offer such arrangements; however, current IWC daily overtime regulations penalize employers who offer flexible schedules because the employers incur overtime costs whenever an employee works over eight hours in a day -- even if hours are only adjusted on a couple of days in a week and employees do not work more than 40 hours in a week. Certainly, it is counterproductive for the state to hit employers with a daily overtime financial penalty when an employee's total time worked does not exceed 40 hours in a week.
Following the Northridge earthquake in January 1994, I issued Executive Orders W-75-94 and W-84-94 to invoke my emergency authority to suspend regulations impeding recovery from an emergency. These orders temporarily suspended daily overtime requirements in counties whose traffic situations were adversely affected by the severe damage to several freeways in the Los Angeles region. Without the penalty of daily overtime, employers were free to schedule employees with flexibility in order to shift their commutes to times when traffic was less heavy, or enable employees to utilize other modes of transportation. The resulting flexibility benefited employers and employees, many of whom communicated with me and my administration to note the positive results.
Following the end of the emergency in the Los Angeles area, I rescinded my Executive Orders. However, I called upon the Legislature to enact a repeal of daily overtime requirements in order to promote flexibility and place California on the same competitive playing field as nearly all other states. The Department of Industrial Relations sponsored, as mentioned above, Assembly Bill 398 (Aguiar) to conform California's overtime requirements with the FLSA. This legislation, however, failed passage in the Assembly Labor and Employment Committee on a straight party line 4-4 vote.
In the absence of legislative action, I am writing to request the Industrial Welfare Commission commence rulemaking to reform its 14 wage orders requiring daily overtime after eight hours in a day in the interest of promoting greater flexibility and enhancing California's economic competitiveness, as sought by AB 398.
It is important to note that this proposal is not an attack on employees or on the eight-hour day, as some vocal opponents and their sympathizers in the Legislature have attempted to misconstrue it. We must keep in perspective the history of the eight-hour day. Contrary to popular belief, daily overtime and the eight-hour day never have been enshrined in federal or California law. In 1911, California enacted legislation establishing an eight-hour day, but this law did not require payment of daily overtime nor did it limit the number of hours that could be worked in a day. At that time, many workers were paid by the day, and this law simply sought to clarify how many hours would commonly be considered one day's pay. Daily overtime was first required by the IWC in 1918 in the wage order covering the fruit and vegetable canning industry -- but it was required only for women and children. Daily overtime was not required to be paid to men until 1980. When the federal government established a standard work week with the FLSA, it established a 40-hour work week with weekly overtime required for work over this limit. No daily overtime requirement or standard workday was set. Nearly all states followed the FLSA overtime standards.
In our modern, competitive economy and with a social climate in which employees increasingly face the challenge of balancing work and family schedules, Californians need the enhanced flexibility that would be available if our overtime requirements conformed with federal law. Since legislative action has not been forthcoming, I urge the IWC to use its rulemaking authority to inject more flexibility in overtime regulations.