California Labor Code Section 514 lets a unionized employer and its workers negotiate their own overtime rules through a collective bargaining agreement, replacing the state’s default daily and weekly overtime thresholds. The exemption applies only when the CBA meets three conditions: it must address wages, hours, and working conditions; provide premium pay for all overtime hours; and pay covered employees a regular hourly rate at least 30% above the state minimum wage. With California’s minimum wage at $16.90 per hour as of January 1, 2026, that floor is $21.97 per hour.1Labor Commissioner’s Office. Minimum Wage Miss any one of those requirements and the standard rules snap back into force.
What Section 514 Does
Section 514 is a single sentence, but it does a lot of work. It declares that Sections 510 and 511 of the Labor Code “do not apply” to employees covered by a qualifying collective bargaining agreement.2California Legislative Information. California Code Labor Code 514 For those employees, the state’s daily overtime threshold, weekly overtime threshold, seventh-day rules, and the alternative workweek election process all disappear. The CBA becomes the sole source of overtime rules.
The reasoning is that union-represented workers already have collective bargaining power to negotiate pay protections. Rather than layering state mandates on top of a negotiated contract, the legislature lets the parties design their own overtime structure, provided the agreement clears a minimum bar.
The Three Requirements a CBA Must Meet
Not every union contract triggers the exemption. Section 514 imposes three conditions, and all three must be satisfied.2California Legislative Information. California Code Labor Code 514
First, the CBA must expressly address wages, hours of work, and working conditions. A contract that only addresses wages without spelling out hours or working conditions does not qualify. Courts look at whether the agreement actually sets out these terms rather than pointing to them vaguely.
Second, the agreement must provide premium wage rates for every overtime hour it defines. The statute does not lock in a particular multiplier like time-and-a-half, so the parties have room to negotiate. What matters is that some premium above the regular rate applies to all overtime hours under the contract.
Third, covered employees must earn a regular hourly rate of at least 130% of the state minimum wage. As California’s minimum wage moves, this floor moves with it. The 2026 minimum wage of $16.90 puts the Section 514 threshold at $21.97 per hour.1Labor Commissioner’s Office. Minimum Wage Any CBA negotiated under an earlier minimum wage should be checked to confirm the hourly rate still clears the current floor.
The Default Overtime Rules Section 514 Replaces
To see what the exemption is worth, look at what applies without it. Labor Code Section 510 treats eight hours as the standard workday. Non-exempt employees earn time-and-a-half for hours beyond eight in a day, beyond 40 in a week, or for the first eight hours on a seventh consecutive workday. Hours past 12 in a day, or past eight on that seventh day, trigger double time.3California Legislative Information. California Code Labor Code 510
The daily trigger is what makes this expensive. Federal law under the Fair Labor Standards Act only counts hours past 40 in a week, so a 10-hour Tuesday paired with a 6-hour Wednesday costs an employer nothing extra federally. In California, those two extra hours on Tuesday are overtime regardless of the weekly total. Section 514 is the mechanism unionized employers use to get out from under that daily threshold.
What Section 514 Does Not Exempt
The exemption is narrow. It only removes Sections 510 and 511 from the picture. Every other California labor protection stays in place for unionized employees, and this is where employers sometimes get into trouble.
Meal periods are the clearest example. Section 514 does not touch the meal break requirements in Labor Code Section 512. Employers must still provide a 30-minute meal break before an employee works more than five hours, and a second break before more than 10 hours.4California Legislative Information. California Code Labor Code 512 Section 512 contains its own separate CBA exemption path for certain occupations, with its own qualifying conditions. Clearing Section 514 for overtime does not clear Section 512 for meals.
Federal overtime is the other boundary. Section 514 is a state-law exemption. The FLSA still requires time-and-a-half for hours beyond 40 in a workweek, and a CBA cannot waive that floor.5U.S. Department of Labor. Fact Sheet 17A – Exemption for Executive, Administrative, Professional, Computer and Outside Sales Employees A Section 514 CBA can eliminate California’s daily trigger and restructure weekly overtime, but it cannot push the weekly overtime threshold above 40 hours. Most qualifying CBAs build their overtime structure around that 40-hour federal boundary.
What Schedules Become Possible
Schedule flexibility is the whole reason employers and unions pursue the exemption. Without it, any shift longer than eight hours generates daily overtime even when the weekly total is modest. With it, the parties can design schedules around the job.
Common arrangements include four 10-hour days, three 12-hour shifts, or rotating schedules that compress a workweek into fewer days. These show up often in construction, healthcare, manufacturing, and entertainment, where longer shifts fit project timelines or patient care needs. Under default Section 510 rules, an employer running three 12-hour shifts would owe four hours of daily overtime per shift. Under a qualifying CBA, the parties can define overtime differently and potentially eliminate that daily premium.
The CBA might set overtime to begin after 10 or 12 hours in a day, or only after 40 hours in a week. Whatever trigger the parties negotiate is the trigger. The constraints are that some premium rate must apply to all hours the CBA calls overtime, and the regular hourly rate must stay above the $21.97 floor.2California Legislative Information. California Code Labor Code 514
When the CBA Falls Short
If a CBA does not satisfy all three requirements, the exemption is void and Section 510 applies retroactively. Every hour that should have been paid at time-and-a-half or double time becomes an unpaid wage. The exposure builds quickly for employers who have been running compressed schedules for months or years under an agreement they assumed qualified.
Labor Code Section 1194 lets an employee who was paid less than the required overtime rate recover the full unpaid balance, plus interest, reasonable attorney’s fees, and court costs. This right cannot be waived by agreement; the statute states plainly that no agreement to work for a lesser wage bars the employee from collecting what was owed.6California Legislative Information. California Code Labor Code 1194 Liquidated damages under Section 1194.2 are available for minimum wage violations but not overtime claims.7California Legislative Information. California Code Labor Code 1194.2 Even so, back pay, interest, and attorney’s fees on overtime alone can be substantial in a class or representative action covering an entire bargaining unit.
Employees generally have three years to file a claim for unpaid overtime in California. If an employer willfully fails to pay wages owed at termination, waiting time penalties under Section 203 can add up to 30 days of the employee’s daily wages on top of the unpaid overtime.8California Legislative Information. California Code Labor Code 203
Arbitration and Where Wage Claims Go
Many CBAs include arbitration clauses, and employers often assume any wage dispute must go through the grievance process. California courts have pushed back. For a CBA’s arbitration clause to cover statutory wage and hour claims, the agreement must contain a clear and unmistakable waiver of the employee’s right to go to court. A general arbitration provision that does not specifically reference wage and hour claims or Labor Code violations will not be enough to force those claims out of court.
This matters most when the Section 514 exemption itself is being challenged. An employee arguing that the CBA fails to qualify under Section 514 is asserting a statutory right to overtime under Section 510. Unless the agreement specifically routes that kind of claim to arbitration, the employee keeps the option of filing in court.