If you were paid overtime and received flat rate bonus payments – but are not certain how the bonus was factored into your overtime rate, you should consult with an overtime pay rights lawyer who represents workers, not employers. This, when taken together with California’s longstanding position that its labor laws are to be liberally construed in favor of workers, led the court to conclude that only non-overtime hours should be used in calculating the value of flat-sum bonus payments. Overtime Calculation Example, with Non-Discretionary Bonus: Hourly employee “Bill Bonus” worked 52 hours last week, including 12 hours of overtime at “time and one-half.” Bill’s hourly (straight) rate is $10.00. The California Supreme Court recently released an opinion that will result in workers receiving more overtime pay in pay periods in which they work overtime and receive a flat sum bonus. To receive seminar invitations, learn about upcoming topics or register for an event, email us at seminars@lightgablerlaw.com or call 805.248.7208. 2929225 – FLSA: Overtime Pay Calculation Over Non-Discretionary Bonus (Payroll changes) Prerequisites. Copyright Michael D. Lore, P.C. This regular rate equals an employee’s base salary, in addition to non-discretionary bonuses. Thus, the bonus should be treated as being earned as a result of only the non-overtime hours in the pay period – “as if it were earned on a per-hour basis throughout the relevant pay period.”  This led the court to conclude that only the non-overtime hours an employee works should be considered when calculating the bonuses’ per-hour value. The employee would then be entitled to 37.5 cents for each overtime hour (and $.50 for each double time hour). Many employers do not know that paying a non-discretionary bonus to non-exempt employees will require the payment of additional overtime. Note that California requires employers to use a different overtime calculation method when including bonus or commissions. For assistance with any employment law matters contact the employment attorneys at LightGabler. 2. p. This type of calculation would be made for every week during which the employee worked overtime to arrive at the additional amount of overtime pay to which she would be entitled. The Supreme Court reasoned that despite being void, the DLSE Manual’s calculation was interpretive of some governing statute or regulation. As a prerequisite, you must have the following SAP Notes installed and their manual steps performed: 2637755 – FLSA: Separation of Bonus and Regular Rate of Pay for overtime adjustments The bonus in the case was an attendance bonus of $15 per day paid to any employee who … 49-9.). Add that sum to the wages earned during the workweek. The time to take action is now. Any non-discretionary bonuses paid to non-exempt employees who work overtime should be looked at to insure workers have been properly paid the full amount due to them. Question: How do we handle overtime pay calculations for hourly employees when they receive nondiscretionary bonuses? Because California Overtime Pay Laws are More Favorable to Employees. Specifically, the Court said that employers should have always used the formulas outlined in the 2002 DLSE Enforcement Policies and Interpretations Manual (DLSE Manual). To bolster this reasoning, the California Supreme Court independently reviewed the governing law, and ultimately agreed with the DLSE’s interpretation of how to factor a flat sum bonus into an employee’s regular rate of pay for purposes of calculating overtime compensation. You must then recalculate the regular rate (and corresponding overtime premiums) for each week, incorporating these revised numbers. Now assume the employee worked 50 hours each week and the work month was exactly four weeks. If the hourly employee who earned the bonus also worked overtime during any workweek of a period covered by the bonus, you must recalculate the regular rate to determine the appropriate overtime rate. The court noted that the flat sum bonus at issue was payable even if the employee didn’t work any overtime hours during the pay period. The bonus in the case was an attendance bonus of $15 per day paid to any employee who worked a full weekend shift on a Saturday or Sunday. This is important because it means that bonuses make your overtime pay higher. info@lightgablerlaw.com. As noted above, the DLSE’s formula (the one adopted by the Dart Container court), is a three-step process. from the Los Angeles office of Hinshaw and Culbertson LLP described a methodology for calculating a nondiscretionary bonus: The California Labor Commission manual specifically mentions flat sum bonus payments such as “$300 for continuing to the end of the season, or $5.00 for each day worked”. ThinkHR customers can get information on just about everything about wage and hour issues in their states and under the FLSA, including minimum wage and overtime, in the compliance section of their ThinkHR account. Employers who have paid any type of non-discretionary bonuses to non-exempt employees should immediately seek legal advice to determine whether they are paying overtime correctly and consistent with the law clarified in Dart Container. While this decision was limited to flat sum or flat rate bonuses “comparable to the attendance bonus at issue”, it is not clearly established at this point to what extent this more generous calculation might apply when employees get other types of non-hourly compensation. The correct view of state law, according to the Supreme Court, and the proper divisor for calculating the per-hour value of a flat sum bonus is the number of nonovertime hours the employee worked during the pay period. The California rules calculate the overtime rate using the employee’s non-overtime hours only, plus bonus or commission, where the FLSA uses all hours worked by the employee. Bonuses Factor Into Overtime Pay – The California Division of Labor Standards Enforcement requires that an employee’s overtime is calculated and paid based on the employee’s “regular rate” of pay. A recent California decision (Marin v. Costco) serves as a reminder that paying a bonus to non-exempt employees can trigger additional overtime obligations.

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