Overtime Pay: Calculating Bonuses into the Regular Rate

Under California labor laws, if you are an hourly employee bonuses and other compensation must be included in your regular rate of pay for purposes of calculating your overtime rate. For example, suppose you are working as a property manager and as part of the job you receive a unit to live in that costs $900/month. The $900 must then be divided by 160 hours (4 weeks at 40 hours a week) and then must be added to your regular rate of pay BEFORE overtime is calculated. 

Under this example, $900 / 160 hours = $5 

Suppose you are paid $15 per hour of work. When the employer calculates your overtime rate of pay, the employer takes the $15 and multiplies it by 1.5x, which California overtime laws set as the overtime rate. Therefore, your overtime rate of pay is $22.5. However, this would be considered a violation of Californiaq labor laws in that the regular rate of pay should have included an additional $5 of pay.

Therefore, your hourly rate of pay should have been $15/hour + $5= $20 hourly rate of pay

The overtime rate should have been 1.5 times the regular rate of $20, which would be $30/hour vs. the $22.5/hour that the employer is paying you. 

This is $7.5 you are losing per hour of overtime you work. Suppose you work 20 hours a week, that would be an additional $150 for you to spend per week. Per year, that little mistake by your employer would cost you $150 a week times 52 weeks = $7,800 year. 

The statute of limitations in these types of overtime cases can extend back four years so your potential claim could be valued at $31,200 which does not include damages, such as waiting time penalties other penalties and interest. 

Finally, these types of cases are great for class action lawsuits because it is usually very systematic when employers fail to include bonuses in the regular rate of pay for purposes of calculating your overtime rate. 

Contact one of our employment law attorneys for more information about your legal rights.