ACCORDING to recent reports, Sarah Chookey worked as a commissioned sales employee in the automotive department of Sears in its branch in Thousand Oaks, CA. Apart from commissions, Ms. Chookey was also paid a base pay rate (an hourly rate). When Ms. Chookey worked overtime, her overtime pay was based only on her base pay rate.
In 2012, Ms. Chookey sued Sears for failing to pay her and other Sears commissioned employees the correct overtime rate. Ms. Chookey claimed that Sears failed to include her commission payments when computing her overtime pay rate. The lawsuit also claimed that Sears provided incorrect pay stubs and failed to provide meal and rest breaks to its employees, for which the employees were not paid.
Rather than proceed to trial, the parties agreed to settle the case. The judge recently approved a settlement of about $3.2 million for over 18,000 affected employees.
If employees are paid an hourly rate plus some other type of compensation, and they work overtime too, then their “regular rate” for purposes of computing overtime, may be higher. Below are three methods of compensation that may increase overtime pay:
Hourly rate + commissions
Employers who pay employees a commission as well as an hourly rate, must be include the commissions paid in determining the hourly employee’s regular rate of pay. The regular rate of pay is computed by totaling all commissions paid and hourly pay for the workweek and dividing that by the number of hours that the employee worked for that week. The result is the employee’s regular rate, which is then multiplied by 1.5 (time and a half) to derive the overtime rate of pay for every overtime hour worked after 8 and up to 12 hours per day.
Hourly rate + bonus
Nondiscretionary bonuses (intended to increase productivity) are treated as wages and included in the employee’s regular rate when computing overtime pay. The bonus is apportioned over the workweeks the bonus was earned. Example: Employee earns an hourly rate of $10 per hour, plus a performance bonus of $2000 in a 6-month period. When the bonus is included as part of the employee’s regular rate, the overtime rate is $17.88, not $15. The difference of $2.88 per hour may become significant when spread over a long time.
Hourly rate + shift differential pay
A shift differential pay, for working undesirable hours or tasks, is considered part of wages and included in computing the overtime rate. Example: Employee works 14 hours per day and is paid $30 per hour plus a $3 per hour shift differential. When including the differential pay of $3 per hour for computing overtime, the regular rate should be $33 per hour. The overtime rate is $49.50/hour, not $45 per hour.
Determining the correct amount of your overtime compensation under the law can be technical and may become confusing. However, correctly applying the law in computing the overtime pay may mean more wages to benefit employees and their families.
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The Law Offices of C. Joe Sayas, Jr. welcomes inquiries about this topic. All inquiries are confidential and at no-cost. Atty. Sayas’ Law Office is located at 500 N. Brand Blvd. Suite 980, Glendale, CA 91203. You can contact the office at (818) 291-0088 or visit www.joesayaslaw.com.
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C. Joe Sayas, Jr., Esq. is trial attorney who has obtained several million dollar recoveries for his clients against employers and insurance companies. He has been selected as a Super Lawyer by the Los Angeles Magazine, featured in the cover of Los Angeles Daily Journal’s Verdicts and Settlements, and is a member of the Million Dollar-Advocates Forum.