Bonuses and Overtime in California: Does Your Company Owe You More Money?

If you work overtime in California and are are paid a bonus in addition to your hourly rate, you may be owed more money under a new California Supreme Court decision called Alvarado v. Dart Container Corp. (2018) 2018 WL 1146645.

In Alvarado, the workers were paid an “attendance bonus” if they worked on a Saturday or Sunday:  In addition to their hourly rate, they were paid an extra $15 per day of weekend work.  California law requires that bonuses be included as wages when calculating overtime rates for employees who work more than eight hours in a day, or more than 40 hours in a week.

The question in Alvarado was how to calculate an employee’s overtime rate when the employee earned a flat sum bonus during a single pay period.  Both the trial court and the court of appeal granted summary judgment to the employer.  However, the California Supreme Court reversed, and clarified how flat rate bonuses should be factored into overtime pay:

1. A employee’s regular rate of pay includes incentive pay (such as bonuses for working on weekends) that is part of the employee’s overall compensation package.
2. In order to determine the per-hour value of a flat sum bonus, employers must divide the bonus by the total number of nonovertime hours worked in the pay period.  This means the total number of nonovertime hours actually worked, not the total number that exist in that pay period.  Call this figure bonus/non-ot.
3. Bonus/non-ot is then multiplied by 1.5 in order to determine the employee’s overtime pay rate based on the flat sum bonus.  The final number would be multiplied by the number of overtime hours worked in order to determine how much overtime the employee is owed for the bonus alone.
4. The overtime based on the flat rate bonus would then be added to the number of overtime hours worked times 1.5 the employee’s hourly rate the in order to determine the total amount of overtime owed to the employee.

The California Supreme Court clarified that this holding was not limited to future payments.  In other words, it applies to overtime earned in the past as well.

If you have questions about your overtime pay, feel free to contact Hunter Pyle Law for a free and confidential initial intake procedure.  We can be reached at (510) 444-4400 or inquire@hunterpylelaw.com.