California’s Unique Overtime Laws Are Costing Taxpayers Millions of Dollars a Year

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Unlike most states, California requires employers to pay overtime after eight hours of work. This discourages employers from offering compressed work weeks. Since shorter work weeks would reduce the number of commuter trips, transportation system improvements could be cut back, saving taxpayers millions of dollars a year.

California is one of four states with more stringent overtime laws than the federal government. In addition to limiting the types of schedules that employees can work, these unusual overtime laws are costing taxpayers millions of dollars a year.

Under the national Fair Labor Standards Act, employers must pay overtime after 40 hours in a workweek. In California, however, employers also must pay overtime whenever employees work more than 8 hours in a day. Rather than benefiting employees, this law actually deprives them of the ability to work the type of schedule they want: a compressed work week that utilizes 9, 10 or 12-hour work days in exchange for fewer days of work.

The annual benefits of a compressed work week are compelling:

  • Up to 87 fewer days of work (equivalent to a 3-month vacation) with no loss of income

  • As much as 78.5 fewer hours spent commuting to work
  • Up to $1,360 lower vehicle operating costs (equivalent to a 3% raise for the average commuter)

According to Dan Capshaw, a partner at Shiftwork Solutions LLC, 75 percent of the tens of thousands of workers his company has surveyed prefer to work longer shifts so they can have more days off each week. “The California law discourages employers from adopting compressed work week schedules because of the overtime costs. Simply put, it’s cheaper to work people more days a week to avoid paying overtime after 8 hours a day.”

With compressed work weeks, fewer commuting trips are required. The reduced mileage will lower the demand for new roads as well as the need for street and highway maintenance. It only takes a small percentage of employees to adopt shorter work weeks in order to produce a significant impact on transportation expenditures. For example, if five percent of the workers in California adopted compressed work weeks, vehicle mileage will drop as much as 1.3 billion miles a year or 0.38% of the total vehicle miles traveled. If highway construction and maintenance expenditures were reduced proportionately, this will save California taxpayers $42 million a year. Since a majority of the workforce prefers shorter work weeks, a five percent conversion rate is probably conservative. Clearly, the potential for substantial tax savings is there.

Jim Dillingham, another partner at Shiftwork Solutions LLC, states, “Compressed work weeks have been proven to be a safe, productive alternative to long weeks of 8-hour shifts. Employees clearly want the extra time off. Taxpayers would welcome a free alternative to expensive transit systems, and we all want less congestion on the roads.” He concludes by stating, “There really is no logical reason for the restrictive overtime laws in California. Sometimes we can be our own worst enemy.”

Consultants from Shiftwork Solutions LLC have helped hundreds of companies in a variety of industries to develop shiftwork solutions that satisfy business requirements, employee preferences, and health/safety considerations. The company’s two partners, Capshaw and Dillingham, have worked as consultants in this specialized field for more than 15 years apiece.

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Bruce Oliver