IR # 97-24
Friday, April 18, 1997

Rick Rice
Louis Bonsignore
(415) 972-8835

New Overtime Rule To Go Into Effect January 1, 1998

SAN FRANCISCO -- Industrial Welfare Commission chair Robyn Black today announced that California's amended overtime regulation, approved by the Industrial Welfare Commission (IWC) on April 11, will become effective on January 1, 1998.

"The decision by the members of the Industrial Welfare Commission conforms state overtime regulations for many of California's vital industries and occupations with the rules of the federal government and 47 other states," Black said. "Allowing for payment of overtime after a 40 hour work week rather than on a daily basis will permit employers to provide flexible scheduling for individual workers, thereby giving them the opportunity to balance their work and personal lives."

"Until the new rule becomes effective next January, the current daily overtime regulations must be adhered to," said Black, "and we intend to use the next several months to educate workers and employers about the new regulations in order to limit any confusion that may arise as a result of this change."

Black noted that although the new regulations could have become effective as early as July 1, the IWC felt that it should not rush to implement the change at the risk of causing undue confusion among the employer and labor communities. As the law requires, a notice will be published and all California employers within the affected industries will be notified of the change through a mass mailing at least 60 days prior to the January 1, 1998 effective date. In addition, public information materials will be developed and distributed by the Department of Industrial Relations explaining the changes in easily understandable language.

The regulation covers five occupations and industries including the manufacturing industry; mechanical, clerical, technical and professional occupations; hotels, restaurants, and hospitals (public housekeeping); retail, wholesale and sales (mercantile); and the transportation industry.

Workers employed in the industries or occupations listed above who are covered by collective bargaining agreements are not affected by the change in the wage orders since these agreements supersede state regulations. Also there will be no change for private sector exempt employees, such as doctors, lawyers, other professionals and executives. In addition, federal employees, state and local government employees and those employed by the state Legislature remain unaffected by the IWC's action.

"The Commissioners responded to the needs of most working Californians who have voiced their need for flexibility and sought the ability to spend more time with their families and better balance their work and personal obligations," Black noted.

A study of the change in how California calculates overtime, conducted by the Hoover Institution at Stanford University, shows that it is likely to result in an additional $500 million in annual earned income for California workers as well as in increased flexibility for California workers.

In addition to the flexible workweek proposal, during the April 11 public hearing the IWC considered but rejected another proposal which would have amended the term "primarily" in defining which employees may be considered exempt from state overtime requirements.

Commissioners did approve a proposal calling for an increase in the amount paid for meals and lodging expenses tied proportionally to the increases in the state's minimum wage. The meals and lodging increase becomes effective January 1, 1998, and will go up again when the minimum wage is raised on March 1, 1998.

The IWC also approved a change that will permit employees to waive a meal period, provided the waiver is documented in a written agreement voluntarily signed by both the employer and the employee. The waiver is revocable by the employee with at least one day's notice. The waiver of one meal period allows an employee freedom to choose between leaving work one half hour earlier or taking a second meal period on a long shift.

Commissioners also found an exemption of overtime was warranted for some commissioned employees in the hospitality industry, including hotel sales managers and banquet managers.

The Industrial Welfare Commission orders are currently being amended to incorporate the revisions adopted at the IWC public meeting held on April 11, 1996. The IWC intends to mail the revised Orders to all California employers at least 60 days prior to the January 1, 1998 effective date of these changes.