Alvarado v. Dart Container Corp. of California
229 Cal. Rptr. 3d 347
Cal.2018Background
- Hector Alvarado, an hourly warehouse associate, received a flat $15 attendance bonus for completing scheduled weekend shifts; bonus amount did not increase with overtime.
- Dispute: how to include a flat-sum bonus in the "regular rate of pay" for calculating overtime under Cal. Lab. Code § 510 and IWC Wage Order No. 1.
- Dart’s method: allocate the bonus across total hours worked (including overtime) when computing the per-hour bonus value, yielding a lower overtime multiplier effect.
- Alvarado’s method (and DLSE manual position): allocate the bonus only across non-overtime hours actually worked in the pay period, increasing the overtime rate attributable to the bonus.
- Trial court and Court of Appeal adopted Dart’s reliance on federal regulation; Supreme Court granted review and considered DLSE enforcement policy (treated as a void underground regulation but still persuasive if correct).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| How to compute per-hour value of a flat-sum bonus for overtime calculation | Divide the bonus by the number of non-overtime hours actually worked in the pay period | Divide the bonus by total hours worked (including overtime) per federal guidance | Bonus must be divided by non-overtime hours actually worked in the pay period; use 1.5 multiplier on that per-hour value for overtime premium (plaintiff prevails) |
| Whether DLSE enforcement policy is binding | DLSE policy supports plaintiff’s method and is persuasive even if not formally adopted | DLSE policy is a void underground regulation and cannot control; federal rule should govern in absence of a valid state rule | DLSE policy is a void underground regulation but court may consider and adopt its interpretation if persuasive; here the DLSE approach is persuasive on the issue |
| Whether state law is displaced by federal regulation on bonuses | State law (Lab. Code § 510 and IWC wage orders) governs and is more protective; courts must interpret "regular rate of pay" under state law | In absence of a California regulation on bonuses, federal regulation should apply | Federal regulation does not displace state law; state statutes and wage orders control and require interpretation favoring worker protection |
| Retroactivity / relief exposure for employers | Apply ruling retroactively so employees can recover unpaid overtime and penalties | Limit ruling to prospective relief due to employer reliance on federal rule | Court applies ruling retroactively; rejects prospective-only limitation because defendant lacked reasonable settled-law reliance |
Key Cases Cited
- Tidewater Marine Western, Inc. v. Bradshaw, [citation="14 Cal.4th 557"] (Cal. 1996) (agency enforcement policies that are intended to apply generally may be underground regulations subject to APA; such policies are void but their interpretations may be considered)
- Yamaha Corp. of America v. State Bd. of Equalization, [citation="19 Cal.4th 1"] (Cal. 1998) (agency interpretations not adopted via APA may still be persuasive and taken into account by courts)
- Skyline Homes, Inc. v. Department of Industrial Relations, [citation="165 Cal.App.3d 239"] (Cal. Ct. App. 1985) (weekly salary should be apportioned over non-overtime hours for overtime-rate calculation; reasoning approved in later cases)
- Ramirez v. Yosemite Water Co., Inc., [citation="20 Cal.4th 785"] (Cal. 1999) (express approval of Skyline Homes’ rule on apportioning salaried compensation for overtime)
- Marin v. Costco Wholesale Corp., [citation="169 Cal.App.4th 804"] (Cal. Ct. App. 2008) (addressed semiannual longevity bonus; distinguished because bonus there functioned largely like production pay and was prorated)
- Brinker Restaurant Corp. v. Superior Court, [citation="53 Cal.4th 1004"] (Cal. 2012) (discusses IWC wage orders and state overtime policy favoring worker protection)