Federal Formula for “Flat Sum” Bonus Overtime Calculation Rejected

By: Joshua A. Rodine and Christopher J. Truxler Seyfarth Synopsis: California employers must use the formula prescribed by the Division of Labor Standards Enforcement Manual to calculate overtime on flat sum bonuses, not the bonus overtime formula used under federal law. California law generally follows federal law as to how employers should calculate overtime pay on nondiscretionary bonuses for non-exempt employees. But California law on calculating bonus overtime has been somewhat unclear in relation to “flat sum” bonuses. On March 5, 2018, in Alvarado v. Dart Container Corp., the California Supreme Court decided that a formula invented by the Division of Labor Standards Enforcement—without engaging in any administrative rulemaking—is the proper method for calculating bonus overtime pay, and that the DLSE’s formula applies retroactively. The Facts Hector Alvarado worked as an hourly employee for Dart Container, which makes cups, plates,…

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