California Employee Rights Advocate : California Labor Attorney & Lawyer : Southern CA Employment Law : Los Angeles, Orange County : United Employees Law Group

If California labor law’s dictate you should be classified as a non-exempt employee,  in which you are entitled to overtime pay at 1 ½ to 2 times your straight time rate. And you are promised bonuses for reaching certain goals or you are entitled to commissions, then according to California labor law’s a special calculation must be made that increases your regular hourly overtime rate.   California wage law provides that when a non-exempt employee works hours in excess of eight in any workday or 40 in any workweek, employers must compensate the employee at 1 ½ to 2 times the employee’s regular rate of pay depending on the total number of hours worked. The “regular rate of pay” comprises more than just the employee’s hourly rate of pay it includes many different kinds of monetary remuneration an employee earns for his labor, including commissions and bonuses. 29 U.S.C. 207(e). 

When calculating the regular rate of pay, employers must follow specific rules depending on the type of income in question. Where an employee earns commissions or bonuses, the Department of Labor Standards Enforcement (“DLSE”)  uses the following rule to incorporate the additional compensation into the employee’s regular rate of pay:

“Compute the regular rate by dividing the total earnings for the week, including earnings during overtime hours, by the total hours worked during the week, including the overtime hours. For each overtime hour worked, the employee is entitled to an additional one-half the regular rate for hours requiring time and one-half and to an additional full rate for hours requiring double time.” DLSE Manual, Section 49.2.1.2 

For example, one type of incentive compensation may provide additional compensation if the store performs at a certain level. A company’s bonus plan could provide that a bonus will be paid to employees for increasing sales of specified products, increase profitability, improve customer handling and enhance quality of service. It could be referred to as an Incentive Program that requires employees to reach attendance goals to be eligible. The plan may also specify the payout schedule: eligible employees receive both quarterly and year end payouts. Another type of incentive may also pay certain hourly employees additional compensation, or a commission, for the sale of various products.

Employers must include these nondiscretionary bonuses along with other earnings to determine an employee’s regular rate on which overtime pay is computed. A bonus is “nondiscretionary” if the employer makes a promise to pay it based on the requirements being met. This includes bonuses designed to induce the employees to work more steadily, more rapidly or more efficiently, to remain with the employer, to meet attendance goals, individual or group production bonuses and bonuses for quality and accuracy of work. 29 C.F.R. 778.211(c). 

In any pay period in which a bonus has been earned the employer must recalculate the rate of pay upon which overtime for that pay period is calculated. The employer must add together all compensation earned for the workweek and then divide the compensation by the number of hours worked.


These Bonuses and Commissions Must be Timely Paid

Generally speaking, commissions and bonuses are due and payable after the employee did what was required and the amounts could reasonably be computed. Commissions are considered earned only after the happening of that event designated in the agreement with the employee so long as the event is reasonably tied to the calculation. DLSE Opinion Letter, 2002.12.09-2. 

If for example a commission is earned when the sale is made then that is the date from which all calculations are made.

Labor Code section 204 designates the time frame in which an employer must pay its employees. Wages earned by any person in any employment are due and payable twice during each calendar month, on days designated in advance by the employer as the regular paydays.

Section 204(b)(1) allows an employer additional time to pay commissions in the next pay period but only if it also itemizes the subsequent wage statement by including detailed information regarding the wages that it could not pay on time. Each wage component must be separately listed and specifically list the dates for which it is applicable.

The amount that an employee is short changed may not sound like a lot of money at first, when just looking at just a couple of pay periods. But the amount increases well into the tens of thousands of dollars when a claim includes up to four years of back wages plus interest and plus penalties.

Now you know.

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As California employment attorneys, we regularly receive calls from concerned employees who have been denied a substantial portion of their hard earned wages. They are very concerned that they will never be able to prove what is genuinely owed to them. What they don’t know is that the law favors their right to be honestly paid.

Beginning in the early 1900’s, when working conditions were deplorable, new laws were enacted to protect the wage earner from the abuses practiced by powerful companies.One extraordinary part of the new law was to place the burden on the employer to pay his employees what they are legally owed. This was accomplished by making the employer responsible for accurately keeping all necessary records in order to make the company accountable for all wages owed.

The Labor code is different from almost every other area of law. Under almost all other statutes the party that is bringing the claim has to prove that his claim is valid, in other words the claimant has the burden of proof. This rule has been turned on its head in the labor statutes.   Only very few areas of law that follows a similar rule. For example, one rare exception is found in the tax law. Under the tax code the taxpayer, as a defendant, must prove his return is correct and the IRS, as the claimant, only has to charge that the taxpayer is in error but does not have to prove its case until the taxpayer has presented proof that his tax return is properly stated.

THE EMPLOYER, NOT THE EMPLOYEE, HAS THE BURDEN OF PROOF

As to all facts in contention, the employer has the burden of proof.

That means the following rules apply:

A) Record keeping - The law mandates that the employer has the burden of timely creating records to establish in detail, ALL hours worked by all employees who are entitled to overtime pay. Where there is a failure by the employer to maintain records of hours worked, then an employee's estimates shall control as a matter of law.

B) Overtime Pay - The law presumes that the employee is entitled to be paid for all overtime hours and the employer has the burden of overcoming these presumptions and provide evidence that the employee is exempt from being entitled to overtime.

C) Right to Recover Attorney's fees, Costs and Penalties. - The statutes provide that an employee is entitled to recover all his costs and attorney fees if he prevails on any part of his claim. In addition, he is entitled to recover interest and penalties.

What does this mean to you?

Do not shy away from demanding what you believe is rightfully yours. Although you may not know exactly what hours you worked over the last four years and what you may be owed you should not conclude that you have forfeited your right to recover your back wages. Legally, it is your employer’s responsibility to know the law and to compensate you in accordance with the law.

There have been too many years that employees were left unprotected and the legislature has mandated that such abuses end, regardless of whether any such underpayments were intentional or a simple error.

In order to level the playing field, you and every other worker has been given the legal tools to provide you an opportunity to recover what you may be owed.

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Our firm has handled close to 1000 labor claims, of which more than 200 were and are class action cases. A large number of these cases were claims we filed against Fortune 500 companies.

The fact is that very few cases ever go to trial. The reason is that each case reaches a point when the facts have been developed to the extent possible; meaning that there will always be some disagreement as to what took place.

The law is reasonably clear with the outcome dependent upon the version of the story that will be believed. Overriding the desire to have one’s day in court is the practical and reasonable desire to achieve a known outcome. In other words, predictability has substantial value and provides the basis for compromise.

MEDIATION PLAYS A MAJOR ROLL IN LITIGATION

Mediation is a confidential and voluntary effort by the parties to resolve disputes. It utilizes a trained neutral mediator to facilitate and lead the settlement discussion and it is favored and promoted by the courts. It is so effective that all judges order the parties to participate in mediation at some point in the litigation.

Mediation can be a very effective and powerful tool to achieving a client’s objective but only if the attorney fully understands how to make it work for his client.

There are critical differences between litigating and mediating and understanding those distinctions are critical.

The most successful attorneys are those that understand the combination of factors that add up to an outcome that everyone can live with and that makes sense to both parties. The skills that an attorney needs to bring together includes a through grasp of the law and his client’s case, his opponent’s strengths and weaknesses, an ability to listen, to be creative and the skill to present his client’s case in a persuasive manner.

Being pushy or arrogant will not win the day. Keep in mind everyone is participating voluntarily.

Although there are variations as to how a mediator will structure the meeting it is not unusual to begin with a joint session wherein he allows each side to briefly present his case without argument from the other attorney. At the completion of each of these presentations the mediator may then summarize what was presented. Through this process the mediator and the parties are able to identify precisely where they agree and where they disagree. This is key in determining where the mediator and the parties must focus their attention.

From that point forward the parties are separated into their own conference rooms and the mediator then meets with each side separately. He will hold multiple confidential discussions with each group articulating what he sees as their strengths and weaknesses. Through these separate confidential meetings he formulates an understanding of the case putting him in a position to guide each side to a fair resolution.

The mediator is not there to judge what the outcome should be. In addition to what everyone already knows he has a more complete understanding of confidential information that that each side shared with him. Given the fact that he has no obligation to achieve an outcome for the benefit of one side or the other his opinion carries a lot of weight and puts him in a position to bring the parties to a voluntary settlement.

A good mediator attempts to help the parties find common ground; he is not there to determine who is right. In this process the mediator will test each side’s position, pointing out weaknesses and risk. It is up to the attorney to effectively counter these arguments and by effectively doing so will send a message back to opposing counsel.

The fact is I have never seen a client who has just reached a voluntary settlement unhappy. Although neither side will get all they wanted or thought they deserved they have reached an acceptable resolution and that takes a load off their shoulders and that does feel good.

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