top down Icon

Overtime Math You Can't Afford to Get Wrong

Posted on Saturday, March 31, 2018

Time & Attendance Software | California Overtime Ruling | Time Rack

When the California Supreme Court took up the case of a warehouse worker's overtime claim this month, the court took a deep dive into California worker protection policy and came up with a ruling that reinforced the state's longstanding preference for reinforcing employee rights.

But the ruling is also a case study into the way that overtime compliance can create expensive and unforeseen headaches for employers.

Do the Math, But First Figure Out What the Math Is

The case, Alvarado vs. Dart Container Corporation of California,  centered on the math of getting to the correct overtime rate when there is a bonus to factor into the employee's base rate of pay.

At Dart, employees who worked a full weekend shift received a $15 per day bonus. Dart employee Hector Alvarado, the plaintiff, filed a lawsuit against the company in 2012 alleging Dart’s rules for calculating overtime pay were not legal.

In response, Dart argued for following a federal precedent under which the bonus is calculated into the rate of pay, but only after dividing by the total number of hours worked, including overtime hours. That formula yields a lower hourly rate of pay, which then produces a lower overtime rate.

Although Dart's argument was successful in the lower courts,  it was overturned on appeal to the California Supreme Court. Among other things,  California's top court relied on the state's longstanding policy of "discouraging employers from imposing overtime work" and of interpreting the law in a way that favors worker protection.  Their opinion also relied on language from a Division of Labor Standards Enforcement policy that did not have the force of law, but which the court said reinforced the authority of California's long tradition of offering more protection than that provided under federal law.

Bonus Math Can Add Up to Trouble for Employers

In its unanimous ruling favoring the employee, the court noted that for the purposes of determining the time-and-a-half overtime rate,  straight pay is not necessarily the correct starting point.  Overtime math might have to include things like pay adjustments for different shifts, the court wrote.

For California workers, the bottom line is a reinforcement of the state's preference for employee-friendly interpretations of wage and hour law.

For employers, it's a bit of a warning. Even in the absence of a clear law, you can be held liable for getting your overtime calculations wrong. And because the opinion was applied retroactively, you could be on the hook for past instances in which you didn't correctly calculate the base rate of pay from which the overtime rate is derived.

Let Time Rack Do the Math

Don't get tripped up by complicated overtime scenarios. Time Rack time and attendance software can keep you out of court by ensuring that employee hours are accurately accounted for, including features for tracking shift differentials or project-based hours.  Time Rack software can also help you reduce overtime costs with real time alerts for tracking non-compliance with things like lunch breaks.  In addition, an available HR module can provide you with support, education and alerts to help you track changes to wage and hour laws. 

Contact us to learn more about avoiding lawsuits with time tracking solutions