In this episode of California Employment News, Weintraub attorneys Ryan Abernethy and Talia Delanoy revisit the complexities of the regular rate of pay—a frequent issue in wage and hour class actions. From bonuses and shift differentials to common employer mistakes, they break down what must (and must not) be included in calculations, and the costly risks of getting it wrong.

Watch this episode on the Weintraub YouTube channel.



Show Notes:

Ryan: Hello, everyone, and thank you for joining us for this installment of California Employment News, an informative video and podcast resource offered by the Labor and Employment Group here at Weintraub Tobin. My name is Ryan Abernethy, and I'm a shareholder in the firm's Labor and Employment Group. I'm joined today by my partner, Talia Delanoy, who is new to our group, and this is her inaugural episode.

We're happy to have her join our team here. Over three years ago now, Lukas Clary and I spoke with you about the regular rate of pay. But since the regular rate of pay is such a prevalent issue that is increasingly featured in Wage and Hour class actions that we're seeing pouring in. We wanted to revisit that topic today.

Talia, why don't you start us off by giving us a refresher with some basic information about the regular rate of pay, what it is exactly, and what needs to be included within it.

Talia: Yes, absolutely. Thank you, Ryan. Most employers assume that the base rate of pay and employees regular hourly rate is all they need to think about when they calculate overtime and double-time. They just take the base rate of pay, multiply it by one and a half for overtime or two for double time, and that's it. Unfortunately, the calculation isn't that simple. The regular rate of pay, which is different from the base rate of pay, actually includes additional income such as non-discretionary bonuses, shift differentials, which is like additional pay when you have an employee use an undesirable schedule or for a weekend or overnight work, piece rate compensation, such as payment per box of fruit picked, or even commissions. Employers need to add to have all of these types of income in addition to the employee's base hourly rate before calculating both overtime, double time, sick pay, and meal and rest period premium payments. To make this even more complicated, the law requires one calculation for a flat sum bonus, such as $50 paid for weekend work, and another calculation for production bonuses, such as an employee who might earn 5% of all sales in a given month.

Talia: Let's Let me give you a quick example. If you're paying an employee a flat-sum bonus, here's the example. Your employee earns $16 per hour and works 40 straight-time hours and four overtime hours on Saturday. The straight The overtime payment is simple. $16 times 40 hours equals $640. The overtime payment, $24 an hour times 4 hours equals $96. Now, the employee has paid the $50 bonus for working on Saturday. Now you need to calculate the overtime compensation due on the bonus. Now this is where the math comes in. You take $50 in bonus, you divide it by the 40 hours of straight time hours worked, and this gets you $1. 25, which is the per hour value of the bonus. Now you take that $1. 25, you multiply it by 1. 5 for the overtime, and you get $1 87. 5. This is the bonus overtime value per hour. Now you have to actually figure out how much of that goes to the overtime. You take the $1. 87. 5 times the 4 hours of overtime the employee worked, and you get $7. 50. This is the overtime due on the bonus. This is the part that most employers miss.

Talia: When you add all of that up, the total straight time pay, the total overtime pay, the $50 flat sum bonus, and that $7. 50 over time owed on the bonus, you get a total of $793. 50.

Ryan: Well, thank you, Talia.