Many California employees earn bonus compensation in addition to their regular wages. California law has specific requirements about the timing of payment of such bonuses, the identification of such bonus payments on wage statements, and the inclusion of non-discretionary bonuses in calculating an employee's regular rate of pay.
Under California law, bonuses are considered "wages" within the meaning of Labor Code section 200. See, e.g., Schachter v. Citigroup, Inc., 47 Cal. 4th 610 (2009). A bonus is money promised to an employee in addition to the salary, commission, or hourly rate usually due as compensation. DLSE Enforcement Manual (June 2002), § 35.1; see Duffy Bros. v. Bing & Bing, 217 App. Div. 10, 14, 216 N.Y.S. 755 (1926) ("An addition to salary or wages normally paid for extraordinary work. An inducement to employees to procure efficient and faithful service.")
Bonuses may be in the form of a gratuity where there is no promise for their payment ("discretionary bonus"), or they may be required payment where a promise is made that a bonus will be paid in return for a specific result ("non-discretionary bonus").
Calculation Of Regular Rate Of Pay
When an employer calculates an employee's regular rate of pay for purposes of overtime calculation, non-discretionary bonuses must be included into the formula. Because non-discretionary bonuses are earned during straight time and overtime hours, an employee’s regular rate is calculated by dividing the bonus amount by the total hours worked (including overtime hours) during the pay period in which the bonus applies. Marin v. Costco Wholesale Corp., 169 Cal. App. 4th 804 (2009). The overtime premium that is owed to the employee based on the bonus is calculated by multiplying one-half of the regular rate for the bonus by the number of overtime hours worked during the period in which the bonus was earned.
Employers often pay their employees non-discretionary bonuses but fail to include these bonuses when calculating the amount of overtime wages due to the employee. In such cases, the employer may be paying the employee less overtime wages that the employee actually earned.
Contact Sani Law Today
We will aggressively pursue compensation from employers that fail to follow the law. If you have been denied a bonus that you have earned, or if your non-discretionary bonuses have not been taken into account in your overtime wages, Contact Sani Law today to schedule a free initial consultation.