One Overtime Rate Does Not Fit All:  Irregular and Short is Not in Style.

You may be shorted on overtime pay if your employer fails to correctly calculate the “regular rate of pay.”  Your stated hourly rate as a non-exempt employee is not the end of the calculation of your base rate for overtime purposes.  The hourly rate may be increased by bonuses added to your pay, even if those bonuses are discretionary.

Employers are often ignorant or worse, knowledgeable but non-compliant, when it comes to the correct calculation of this “regular rate of pay.”  A recent California case has resolved a conflict between the California Department of Labor Standards Enforcement calculation and the federal Fair Labor Standards Act [FLSA] standard for calculation.  Alvarado v. Dart Container Corp. [1/14/16, CA Ct. of Appeal].

Although the Alvarado case was a set back for employees, it makes instructive reading to understand how employers can be exposed to major wage violations on a class action basis if years go by with underpayment of the correct overtime rate.  Here is the basic FLSA formula:

Overtime Rate Formula

Total hours worked in the workweek.  Total of all forms of compensation paid in that workweek, including all bonus money.  All compensation divided by all hours equals the regular rate of pay.  This number then is used to calculate the overtime premium rate.

This “regular rate of pay” is used for other purposes too, such as your paid hourly rate for calculating your sick leave pay under the recent (2015) California Paid Sick Leave Act [PSLA].