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Attorney Says California Overtime Bonus “Miscalculations” are Violations

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Encino, CAAre Californians still overworked and underpaid? According to employment law attorney David Yeremian they are, and overtime claims are increasing. One major issue accounting for the rise has to do with overtime bonus violations.

Yeremian says that his firm has seen many overtime bonus “miscalculations” and many new cases are being filed. “When it comes to the topic of bonuses, our law firm sees employers dropping the ball across the board, but these violations are most prevalent in retail and industries where compensation is paid on a piece-rate basis,” he explains.

Overtime bonus violations are based on the lack of getting your bonus pay factored into your base rate of pay. In California, all your compensation must be factored into your base rate of pay, which is used to calculate your overtime.

“For instance, say you are a salesperson at an auto dealership and your boss puts up an incentive for sales--whoever sells 10 cars in one day will be entitled to a $500 bonus,” says Yeremian. “If you are entitled to receive overtime pay, that bonus is supposed to be factored into your base rate of pay when calculating overtime.”

(If you are exempt, of course you are not entitled to overtime. Having said that, if you are strictly in sales you may be misclassified, but that is another issue.)

“Say you are a sales associate at a department store and a large part of your compensation is based on an hourly rate of pay,” Yeremian says. “You may also be entitled to a bonus or sales commission on top of that for reaching certain goals, but that is typically a small portion of your pay. Nevertheless, sales associates who do meet their sales targets and do earn these bonuses or commissions must have them factored into their base rate of pay in order to properly calculate overtime.”

Yeremian goes on to say that every major retailer has been hit with overtime bonus violation lawsuits. “We are investigating all employers where these kinds of violations may exist, wherever a portion of their compensation is derived from a bonus regarding a production quota or sales target, or industries where these types of violations may be taking place."

According to the state of California, wages are defined to include all amounts for labor performed by employees of every description, whether the amount is fixed or ascertained by the standard of time, task, piece, commission basis, or other method of calculation. Wages can be paid based on any hourly rate, salary, commission or piece rate. (Labor Code § 200)

It goes on to say that “a bonus is performance-based compensation to be paid to an employee in addition to the employee's regular salary. A bonus is included in the regular rate of pay for purposes of calculating overtime, but it must be a nondiscretionary bonus. A nondiscretionary bonus is included in determining the regular rate of pay for computing overtime when it is based upon hours worked, production or proficiency.

On the other hand, a discretionary bonus-or an amount paid as gifts at a holiday or other special occasions, such as a reward for good service, which are not measured by or dependent upon hours worked, production or efficiency--are not included as a bonus for determining the regular rate of pay.

A recent bonus overtime class action complaint (Ungureano vs. Conam Management Corporation, Case No. 37-2012-00096977) alleges that Conam, a property management company, paid their non-exempt employees a bonus—which was a monthly nondiscretionary bonus—based on their performance in the communities these property managers worked.

According to the lawsuit filed by employment attorneys at Blumenthal, Nordrehaug & Bhowmik, Conam “failed and still fails to include the monthly bonus compensation as part of the employees’ ‘regular rate of pay’ for purposes of calculating overtime pay.” The complaint also alleges that the failure to include the monthly bonus compensation in the regular rate of pay for the purpose of calculating the correct overtime rate "has resulted in a systematic underpayment of overtime compensation" to the employees.

The case is currently pending in San Diego County Superior Court.

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