Take Notice California Employers:

Attention California Employers:

The long-awaited California Supreme Court case, Alvarado v. Dart Container Corp., (2018) LEXIS 1123, was released today.  This case resolved the issue of how employers should calculate an employee’s overtime pay rate when the employee has earned a flat sum bonus during a single pay period.  Specifically, the Court considered whether the divisor for purposes of calculating the per-hour value of the flat sum bonus should be (1) the number of hours the employee actually worked during the pay period, including overtime hours; (2) the number of nonovertime hours the employee worked during the pay period; or (3) the number of nonovertime hours that exist in the pay period, regardless of the number of hours the employee actually worked.

SPOILER ALERT:  The Court held that the divisor should be (2) above, the number of nonovertime hours the employee worked during the pay period.

Thus, flat sum bonuses should be factored into an employee’s regular rate of pay by dividing the amount of the bonus by the total number of nonovertime hours actually worked during the relevant pay period and using 1.5, not 0.5 as the multiplier for determining the employee’s overtime pay rate.

James C. Anderson, Esq., Triebsch & Frampton, APC

Disclaimer:  The information provided is just a summary for general informational purposes only and is not intended as legal advice.  Please review the actual laws, regulations, and cases to obtain all the latest updates, details, and implications and to reach your own conclusions as to what the law means.  Also seek legal and accounting advice as needed.