📋 Overview

You've received a demand letter claiming unpaid overtime wages. California's overtime laws under Labor Code 510 are among the strictest in the nation, requiring premium pay for work exceeding 8 hours per day or 40 hours per week. This guide helps you evaluate the claim and respond strategically.

⚠ High-Stakes Claims

Overtime claims can include liquidated damages (doubling the amount), plus attorney fees if the employee prevails in court.

🕒 Daily Overtime Rule

California requires overtime after 8 hours/day, not just 40 hours/week. This catches many employers off guard.

💰 Double Time

Work over 12 hours/day or over 8 hours on the 7th consecutive day requires double time (2x regular rate).

California Overtime Requirements (LC 510)

  • 1.5x regular rate - Hours worked over 8 in a workday, up to 12 hours
  • 1.5x regular rate - First 8 hours on the 7th consecutive day of work
  • 2x regular rate - Hours worked over 12 in a workday
  • 2x regular rate - Hours worked over 8 on the 7th consecutive day
  • 1.5x regular rate - Hours worked over 40 in a workweek (if not already paid at OT rate)
$450
Attorney Response on Letterhead

Case review, professional response letter, up to 2 revisions. Often resolves matters without litigation.

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🔍 Evaluate the Claim

Before responding, conduct a thorough internal investigation. Review these key areas to assess the claim's validity and your potential exposure.

Risk Assessment Matrix

Issue If Proven Risk Level
Unpaid daily overtime (over 8 hrs) Back wages at 1.5x + liquidated damages HIGH
Unpaid double time (over 12 hrs) Back wages at 2x + liquidated damages HIGH
Misclassification as exempt All overtime for entire employment period HIGH
Incorrect regular rate calculation Recalculated OT + difference owed MEDIUM
Off-the-clock work claims All uncompensated hours at OT rate HIGH

📄 Time Records

  • ✓ Daily time records for claimed period
  • ✓ Weekly hour totals and OT calculations
  • ✓ Badge-in/badge-out or electronic records
  • ✓ Manager approvals for overtime worked

📝 Classification Documents

  • ✓ Offer letter with exempt/non-exempt status
  • ✓ Job description and actual duties
  • ✓ Salary records (exempt threshold test)
  • ✓ Alternative workweek agreement (if any)

⚠ Recordkeeping Burden

California employers must maintain accurate time records for 3 years. If records are incomplete or missing, courts often credit the employee's reasonable estimates. The burden is on the employer to prove hours worked.

🛡 Your Defenses

Even valid-sounding overtime claims may have defenses. Here are common defenses to California overtime claims.

Exempt Employee Status

If the employee was properly classified as exempt under the executive, administrative, or professional exemption, overtime rules don't apply. California requires: (1) salary at least 2x minimum wage ($66,560/year in 2024), (2) primarily engaged in exempt duties (more than 50% of time), and (3) regularly exercises discretion and independent judgment.

When to use: Employee held a management, professional, or administrative role meeting all three exemption prongs.

Alternative Workweek Schedule

If your workplace adopted a valid alternative workweek schedule under LC 511, employees may work up to 10 hours per day without daily overtime. The schedule must have been adopted through proper employee vote and reported to DLSE.

When to use: Properly adopted 4/10 schedule or other alternative workweek is in place.

Makeup Time

Under LC 513, employees may request makeup time for personal obligations. If the employee voluntarily requested to make up time within the same workweek, those hours may not trigger daily overtime.

When to use: Written makeup time request signed by employee before the time was worked.

Statute of Limitations

Overtime claims have a 3-year statute of limitations for oral agreements, 4 years if based on a written agreement or unfair competition law (Bus. & Prof. Code 17200). Claims for older violations may be time-barred.

When to use: Claim references violations more than 3-4 years ago.

Accurate Compensation Records

If your time and payroll records demonstrate overtime was properly calculated and paid, this is a complete defense. Ensure regular rate calculations included all required components (bonuses, commissions, etc.).

When to use: Records show all overtime hours were paid at correct rates.

🚨 Weak Defenses to Avoid

  • "Employee agreed to work without overtime pay" - Employees cannot waive overtime rights
  • "We didn't authorize the overtime" - Suffered or permitted work must be paid
  • "They could have finished in 8 hours" - Employer must pay for all hours worked
  • "Salary means no overtime" - Only true if properly classified as exempt

⚖ Response Options

Based on your evaluation, choose the appropriate response strategy.

Negotiate Settlement

If the claim has merit, settling early often costs less than liquidated damages and litigation. Offer to resolve the core amount in exchange for a full release.

  • Avoids liquidated damages (2x)
  • Saves attorney fees (both sides)
  • Prevents class action exposure

Assert Exemption Defense

If the employee was properly classified as exempt, send a formal response with documentation of exempt status and duties.

  • Preserves exemption defense
  • May deter weak claims
  • Risk: Exemption scrutinized strictly

Pay and Dispute Penalties

Pay the calculated overtime owed but dispute liquidated damages, arguing the violation was not "willful" under LC 1194.2.

  • Reduces exposure
  • Shows good faith
  • May preserve litigation position

Request Calculation Details

Ask the employee to provide their calculation methodology before responding substantively.

  • Identifies specific allegations
  • Allows comparison to records
  • May reveal weaknesses in claim

📊 Cost-Benefit Analysis: Settlement vs. Litigation

Example: $8,000 overtime claim

Claimed unpaid overtime $8,000
Liquidated damages (if willful) $8,000
Waiting time penalties (LC 203) $6,000
Interest (10% over 2 years) $1,600
Employee attorney fees $20,000+
Your defense costs $15,000+
MAX EXPOSURE IF YOU LOSE $58,600+

💡 Settlement Sweet Spot

For overtime claims under $20,000, settling for 60-80% of the base amount (before penalties) is often economically rational. You avoid liquidated damages, attorney fees, and the risk of other employees filing similar claims.

📝 Sample Responses

Copy and customize these response templates for your situation.

Acknowledgment & Records Review
We acknowledge receipt of your demand letter dated [DATE] regarding claimed unpaid overtime wages. We take all wage claims seriously and are conducting a thorough review of our time records, payroll data, and your employment classification. Please provide the following to assist our review: (1) your calculation of overtime hours claimed and the dates worked, (2) any personal records of hours worked, and (3) the basis for your claimed hourly rate. We will respond substantively within [14/21] days of receiving this information or by [DATE], whichever is earlier.
Dispute Response - Exempt Status
We have reviewed your demand for overtime wages and respectfully dispute the claim. During your employment as [JOB TITLE], you were properly classified as an exempt employee under California Labor Code Section 515 and IWC Wage Order [NUMBER]. Your position met all requirements for the [executive/administrative/professional] exemption: 1. Salary: You earned $[AMOUNT] per year, exceeding California's minimum threshold of twice the state minimum wage. 2. Duties: Your primary duties included [describe exempt duties - management, professional judgment, etc.], which constituted more than 50% of your work time. 3. Discretion: You regularly exercised discretion and independent judgment in matters of significance, including [specific examples]. As a properly classified exempt employee, you were not entitled to overtime compensation. We therefore deny your claim in its entirety.
Settlement Offer
Without admitting liability, and in the interest of resolving this matter efficiently, we are prepared to offer [$AMOUNT] as full and final settlement of all claims arising from your employment, including but not limited to the overtime claims raised in your demand letter. This offer is contingent upon your execution of a mutual release agreement. The release will cover all claims through the date of signing, including any claims under California Labor Code Sections 510, 1194, 1194.2, and any related provisions. This offer will remain open for [14] days. If we do not receive your acceptance by [DATE], the offer will be withdrawn and we will defend any claims through appropriate legal channels.
Dispute - Complete Payment Made
We have completed our review of your overtime claim. Our time records and payroll data confirm that all overtime hours worked during your employment were properly compensated at the required overtime rates. Specifically, our records show: - Total overtime hours worked: [X hours] - Overtime wages paid at 1.5x rate: $[AMOUNT] - Double time wages paid at 2x rate: $[AMOUNT] These payments are reflected in the attached pay stubs for the relevant pay periods. We believe your records may be incomplete or may not account for overtime already paid. If you believe there is a specific discrepancy, please identify the exact dates and hours in question, and we will conduct a targeted review of those specific entries.

🚀 Next Steps

What to do after receiving an overtime claim demand letter.

Step 1: Preserve All Records

Immediately preserve time records, payroll data, and any electronic badge/clock records for the claimed period.

Step 2: Audit Classification

If the employee was exempt, verify they met all three prongs of the exemption test throughout employment.

Step 3: Calculate Exposure

Add up potential wages owed, liquidated damages, waiting time penalties, and attorney fees.

Step 4: Assess Class Risk

Determine if other employees may have similar claims. One demand can become a class action.

If They File with the Labor Commissioner (DLSE)

  • Settlement Conference - DLSE will schedule a conference to attempt resolution
  • Berman Hearing - If no settlement, an evidentiary hearing before a deputy commissioner
  • Appeal - Either party can appeal to Superior Court for a trial de novo

If They File a Lawsuit

  • Respond within 30 days - File an answer or face default judgment
  • Watch for class claims - Plaintiff attorneys often add class allegations for similar employees
  • Consider early mediation - Resolving early limits exposure and fees

Get Professional Help

California overtime claims can escalate quickly, especially if other employees have similar situations. Get a professional response letter drafted on attorney letterhead.

Schedule Consultation - $450

California Resources

  • DLSE Overtime FAQ: dir.ca.gov/dlse/faq_overtime.htm
  • IWC Wage Orders: dir.ca.gov/iwc - Industry-specific requirements
  • Labor Code 510-519: leginfo.legislature.ca.gov - Full text of overtime laws