Pursuant to a recent ruling by the California Supreme Court, state employers must follow admittedly “void underground regulations” issued by the California Division of Labor Standards Enforcement (DLSE) when determining how flat sum bonuses impact overtime calculations under California wage and hour law. The Court found that an employer’s proper reliance on federal regulations issued under the Fair Labor Standards Act (FLSA) for determining the “regular rate” and overtime payments violated state law because even though the DLSE’s regulation was void, it was “not necessarily wrong.”
From a practical standpoint, the ruling adds yet another complex compliance burden to employers that operate in California, and is likely to serve as a disincentive for employers to offer flat sum bonuses to their employees.
A copy of the California Supreme Court’s ruling in Alvarado v. Dart Container Corp. of California, 411 P.3d 528 (Cal. 2018), is available here.
Members of the Center for Workplace Compliance (CWC) can read more here.