It does not appear she should be exempt from overtime based on her salary, so she should normally be paid for all hours worked and not a flat salary under CA law.
Here is a link with more information:
Given this, the company would typically be subject to very substantial penalties if investigated by the state labor board as well as the payment of back wages owed.
The statute of limitations on such a claim is normally 3 years, so if you paid the back wages owed over the past 3 years and begin paying the employee hourly instead of salaried from this point forward, that would normally avert any such penalties.
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