In Arechiga v. Dolores Press, Inc., 192 Cal.App.4th 567, 572-73 (2011) ("Arechiga"), the California Court of Appeal upheld an explicit mutual oral wage agreement that an employee could work 11 hours a day, six days a week for a total of 66 hours per week, at a flat salary of $880.00. This agreement included payment for 26 hours of overtime each week. The employee argued that, because he was a non-exempt employee, Labor Code § 515 governed and his regular hourly rate should have been 1/40th of his weekly salary. The employer, and ultimately the appeals court, disagreed and the appeals court held that California's "explicit mutual wage agreement doctrine" governed. Under this doctrine, the parties may agree to a guaranteed fixed salary as long as the employer pays the employee for all overtime at least one and one-half times the employee's base rate of pay.

In reaching its decision, the appeals court rejected the interpretation set forth in the Enforcement Policies and Interpretation Manual of the Division of Labor Standards Enforcement ("Manual'), which disallowed explicit mutual wage agreements. The appeals court found that the Manual was not entitled to any deference because it was not adopted in compliance with the Administrative Procedures Act. Arechiga, 192 Cal.App.4th at 574.

The appeals court found an explicit mutual wage agreement is valid if the agreement specifies: (1) the days that the employee would work each week, (2) the number of hours the employee would work each day, (3) that the employee would be paid a guaranteed salary of a specific amount, (4) that the employee was told the basic hourly rate upon which the salary was based, (5) that the employee was told the salary covered both his regular and overtime hours, and (6) that it was entered into before the work was performed. Arechiga, 192 Cal.App.4th at 571.

The California Supreme Court has declined to review this case and, as such, explicit mutual wage agreements providing for the payment of a salary to a non-exempt employee are enforceable if they meet the six requirements set forth above.