Many California workers who receive overtime pay may actually be owed more money than they’re getting. The problem often lies in how employers calculate the “regular rate” of pay – the foundation for determining overtime compensation.
Understanding Your True Regular Rate
Under California law, many workers are entitled to overtime pay at one and one-half times their “regular rate” for hours worked over eight in a day or 40 in a week. But your regular rate isn’t necessarily the same as your hourly wage listed on your paycheck.
The regular rate of pay includes various forms of compensation you receive for the work you perform, including:
- Hourly earnings
- Salary converted to an hourly rate
- Piece-rate earnings
- Commissions
- Non-discretionary bonuses
- Service fees and charges passed on to employees
The Service Fee Problem: A Common Oversight
Here’s where many restaurant workers and others in the service industry may be being shortchanged. If your employer charges customers service fees, automatic gratuities, or possibly those “cost of living” charges that are then distributed to employees, these amounts must be included when calculating your regular rate for overtime purposes.
For example: Let’s say you’re paid $17 per hour as a server, but your restaurant adds an 18% service charge to large parties, and you receive a portion of those fees. Those service fees effectively increase your hourly compensation, so your overtime rate should be higher than $17 x 1.5 = $25.50.
Other Forms of Compensation That Affect Your Regular Rate
Nondiscretionary bonuses – such as specific production bonuses, attendance bonuses, or other incentive payments – must also be factored into your regular rate. If you receive a monthly bonus based on a measurable, objective metric, that bonus amount should likely increase your regular rate, which in turn increases your overtime rate.
Multiple pay rates can also affect your overtime calculation. If you work different positions at different hourly rates during the same workweek, your employer is likely required to calculate a “weighted average” to determine your regular rate for that week.
What Doesn’t Count
Not all payments increase your regular rate. Discretionary bonuses (true gifts from your employer), expense reimbursements, and payments for time not worked (like vacation pay) are excluded from regular rate calculations.
Red Flags to Watch For
You may be owed additional overtime compensation if:
- Your employer charge service fees or automatic “gratuities”
- You earn production or attendance bonuses
- You work multiple positions at different pay rates
- Your employer has never adjusted your overtime rate despite these additional payments
If you believe your overtime has been calculated incorrectly, you may want to consider documenting the times you have worked and the amounts you are paid, gathering up your wage statements, and consulting with an employment attorney who can explore potential violations you have suffered and your possible options.