Hi, I'm a little unclear on how to calculate overtime pay for my employees here in California. If my employees work WITHIN 40 hours/wk even if they may work 8.5 hours one day and 7.5 hours on another day to "balance it out", are they entitled to overtime pay?
In other words, if they stay late one evening and arrive later the next morning to off-set the overtime they incurred, are they still owed overtime? I've been paying my employees the overtime incurred per day, but just wondering if I need to do that if they keep their hours at a maximum of 40 hours in a workweek.
Please help, thanks!

In California, yes, you would still owe them overtime pay. In CA, AK and NV, overtime must be paid when an employee works over 8 hours in a day, regardless of how many hours may have been worked or not worked in subsequent days. (CO requires overtime to be paid on a daily basis if the employee works over 12 hours in a day.)

DAW will likely contribute to this, but, in advance of this, the OP may be unnecessarily worried about limiting the work hours to 40 in a work week when there is daily OT involved.

Given a Sunday through Saturday work week and the employee usually works eight hours a day, Monday through Friday.

On each of the first four days, the employee works 8.5 hours, and is paid 32 hours regular, 2 hours OT. On Friday, the employee works 8 hours, all regular, no overtime. Look at the total for the week -- 42 hours. The two hours OT were paid as part of the daily overtime. There is nothing extra due for working on Friday, even though the eight hours put the employee over 40 for the work week.

ScottB is correct. The thing to remember is that each hour is only counted once. The easiest way to do it is to work from the bottom up; calculate the double time; then eliminate those hours and calculate 1.5 overtime; then eliminate those hours and the rest is straight time.
http://www.dir.ca.gov/dlse/FAQ_Overtime.htm

Or Patty :o

California is a big state and there are a lot of people who understand the CA OT rules. At most employers I have worked at, many of the employees understood the CA OT rules at least as well as the payroll staff, and certainly better then management often seemed to.

That is a good factsheet on the CA OT rules referrenced by Patty and should be more then adequate to answer most questions. And Patty correctly is citing the key rule that each hour is only counted once in the most favorable manner to the employee.