Employees got a big win in California Supreme Court recently in a case that ruled on interpretation of guidelines regarding overtime wages. The case in particular examined what formula should be used to calculate overtime wages and whether companies should follow Division of Labor Standards Enforcement rules or federal standards. Plaintiff said company was undercutting his pay by using the federal formula rather than following California rules, which give more favor to employees. And the high court, thankfully, agreed.
Overtime rate of pay is usually calculated using a formula of 1.5 times the regular pay rate. If an employee makes an hourly wage and nothing else, the calculation is easy. For example. someone who earns $12 per hour would receive $18 per hour once they rolled into overtime hours. But there are different interpretations as to what the calculation would be when an employee has additional income that needs to be included, such as a flat sum bonus, according to a Bloomerg report. That’s the crux of the case at hand.
Defendant in this case was a manufacturing company that paid workers an extra $15 bonus for each Saturday or Sunday they worked. The bonus was the same regardless of how many hours were worked on that shift. Defendant was using the federal formula for calculating the overtime rate of pay, which adds up all income earned and divides by all hours worked, including the overtime hours. A lower appeals court sided with the company, sending the case up to the state Supreme Court.
But our wage and hour dispute attorneys in Orange County know California employers are advised to calculate overtime by dividing all income by regular working hours only, based on DLSE guidelines. Appeals court sided with federal law, stating that DSLE is a guidebook, not law. To this point, California Supreme Court agreed. They concluded, however, that the employer should adhere to the guidelines set forth in the book.
This is a strong ruling in favor of employees. Under the federal method, a flat sum bonus gets divided out over and over, so employees actually make less per hour the more overtime they work. California guidelines are designed with the welfare of employees in mind. So the more overtime you work, the more you get compensated per hour.
This is also in line with the intent of the guidelines. Labor standards are created to protect employee interests. They also are meant to keep employers from overworking employees. If the rate of pay goes down as overtime increases, there’s no incentive to cap overtime work. “California has a longstanding policy of discouraging employers from imposing overtime work,” the Supreme Court discussion states.
Our trusted lawyers champion any moves that support employee rights. This ruling reinforces Labor Division standards and creates a precedent for other companies that might favor federal standards. We know that so many employees depend on each and every paycheck to get by. Small discrepancies in hourly wage can make a big difference to a family living paycheck to paycheck. If you are experiencing a wage and hour dispute in your place of work, our lawyers will use our years of experience to protect your employee rights.
Contact the employment attorneys at Nassiri Law Group, practicing in Orange County, Riverside and Los Angeles. Call 949.375.4734.
Alvarado v. Dart Container Corp., March 5, 2018, Supreme Court of California
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