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New Overtime Rule: 'Flat Sum' Bonuses Increase the Hourly

By George Khoury, Esq. on March 14, 2018 | Last updated on March 21, 2019

The California Supreme Court has just settled one hotly disputed overtime issue by deciding that a flat sum bonus is calculated as part of the regular rate of pay for overtime purposes.

If you're not a labor and employment attorney (or even if you are), this is probably pretty confusing. But it actually seems to make quite a bit of sense once it is unpacked, and particularly after the facts of the underlying case, Alvarado v. Dart, are understood.

Flat Sum Bonus Overtime

The plaintiff, a warehouse employee at a container manufacturer, would receive weekly bonuses for working weekend shifts, regardless of whether the shift was overtime. Each weekend shift would earn an employee an extra $15.

When it came time to calculate overtime pay, Dart followed the federal regulatory standards, rather than California's standard. Dart alleged that the California standard was unclear and seemed to have convinced every court along the way, until it reached the California Supreme Court.

Different Ways to Time and a Half

Under federal regulations, the flat sum bonus would be thrown into the overall pot of an employee's standard hourly rate of compensation multiplied by all hours worked. Then, the overtime hours would be multiplied by the standard hourly rate and divided by 2, then added to the pot.

However, as the California Supreme Court explained, under the state's labor regulations (which the court admitted were so unclear as to be "underground"), a flat sum bonus should be added into the non-overtime hours worked, then a new hourly rate recalculated that includes the bonus. And then, to get the overtime amount, that hourly rate should then be multiplied by 1.5, and applied to the overtime hours.

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