Labor Law -- 2018

Alvarado v. Dart Container Corp.   (California Supreme Court)

Proper formula for computing overtime pay

This case concerns whether Dart Container used the proper method for calculating overtime pay after a bonus. Dart Container used the federal formula for calculating overtime pay due after the bonus. A former employee brought suit, arguing that the proper computation method was the California method.

The NAM filed an amicus brief in support of Dart Container in an appeal to the California Supreme Court concerning overtime wage calculations. The lower court held that Dart Container was correct to use the federal overtime formula when it calculated wages because, although the federal law did not preempt state law, there was no valid state law specifying a formula to calculate overtime. Employers trying to pay their employees fairly should not be penalized because of the ambiguity of state law. The NAM's brief argued that no California law provides guidance to calculate overtime on bonuses, and in the absence of such a law, courts should look to federal regulations for guidance and employers should be able to rely on existing law. Unfortunately, the California Supreme Court held that the lower court erred in finding that there was no state law specifying a formula to calculate overtime. It held that the proper rate of pay for overtime hours is to factor the flat sum bonus into the hourly wage of the employee, which increases the amount employers will be legally obligated to pay their employees for overtime.

Related Documents:
NAM amicus brief  (September 28, 2016)


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