• Overtime Premium Calculation

    The California Supreme Court recently clarified how overtime premiums must be calculated and paid for employees who receive shift differential pay, flat sum bonuses, or similar incentives for working less attractive shifts or shifts scheduled at night or on weekends.

    The Court’s opinion is found in Hector Alvarado v. Dart Container Corporation of California. The employer in this case paid employees flat sum bonuses for working weekend shifts as an incentive for showing up and working a weekend. These employees often worked overtime during the weekend shifts. The employer calculated and paid overtime premiums based on a federal regulation as California law was silent on the proper calculation method. The DLSE’s Enforcement Manual recommended a formula that differed from the federal regulation, but the employer declined to follow the DLSE’s recommendation as it was not binding law.

    The federal regulation requires employers in this context to divide the employee’s compensation (including the flat sum bonus/shift differential pay) by the total hours worked by the employee to find the employee’s regular rate of pay. The DLSE’s recommendation was to divide the employee’s non-overtime hours worked in the applicable day by the total non-overtime compensation earned by the employee to find the employee’s regular rate of pay.

    The Court held that the DLSE’s method is the appropriate method to calculate and pay overtime in this context as it is more favorable to employees.

    The following is an example to illustrate the proper way to calculate overtime premiums in this context:

    Employee earns $11.00 per hour as base/straight pay.

    Employee earns $50.00 as a flat sum bonus for working a Saturday.

    Employee works 10 hours on a Saturday.

    Employees non-overtime compensation (for 8 hours of work) is $88.00 plus the bonus $50.00, or $133.00.

    $133.00 divided by 8 hours worked is $16.625 (regular rate)

    $16.625 times the overtime premium of 1.5 is $24.94 (overtime rate).

    $24.94 times 2 hours of overtime is $49.88.

    $49.88 of overtime pay plus $133.00 of non-overtime pay is $182.88 for the day.

    Unfortunately, the Court stated that its ruling is to apply retroactively. All employers who have been following the federal regulations and not the DLSE’s method should contact us to discuss how to comply with this opinion.

    Please contact Jessica Crabbe at JCrabbe@mrjclaw.com or Kurtis Urien at Kurtis@mrjclaw.com with questions on the Court’s opinion and how to properly calculate and pay overtime.

  • Ban the Box Update

    Our colleagues at Ethos Human Capital Solutions reached out to the DFEH to obtain guidance on whether obtaining DMV records prior to making an offer is compliant with the law. The issue that was raised was that conducting a check of an applicant’s driving record may reveal criminal history, such as DUI arrest or conviction but criminal hisotry may not be inquired about until after a job offer is made. According to the DFEH legal department, the law is clear that it doesn’t apply to employers who are “required” to conduct background checks . To the extent an employer is required by law to conduct driving record checks – but who do so because, for example insurance carriers won’t cover employees with certain driving records, may do so without following the procedures set forth in AB 1008, even though the driving record may also reveal criminal information. As long as employers are conducting the inquiry for the purpose of checking the driving record and not conviction history, the DFEH doesn’t see that the inquiry would be improper under the law . If someone filed a complaint challenging such an inquiry, there would need to be a fact-specific determination about the purpose of the inquiry similar to the types of determination they routinely make in employment discrimination matters.