California Supreme Court Deviates From Federal Regulations on Calculating Regular Rate of Pay on Flat Rate Bonuses

Earlier this week the California Supreme Court ruled that when calculating the regular rate of pay for flat rate bonuses an employer must divide the employee’s total pay (including the bonus) by the employee’s total non-overtime hours worked and multiply the result by 1.5 for each overtime hour worked. This diverges from the federal regulations which permit employers to divide the employee’s total pay by their total hours worked, including overtimes hours, and multiply the result by .5 for each overtime hour worked. While the California Supreme Court did not address how to calculate the regular rate for other types of bonuses, commissions or non-discretionary pay, employees are likely to rely on this ruling to argue that the regular rate calculation adopted by the Court applies to other bonuses and non-discretionary pay as well.

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