An important distinction must be maintained between the “the rate or rates of pay” required for the notice under 2810.5 and “a regular rate of pay” for purposes of specifying and calculating statutory overtime compensation. A single rate of pay may be fixed by various measures such as time, task, commission, or piece rate (e.g., $10.00 per hour or $.33 per box). A single fixed pay rate does not constitute a variable rate of pay simply because it results in potentially different amounts of total wages earned over different pay periods (e.g., in pay period #1, employee earns $400 based on 40 hours @ $10.00/hour and in pay period #2, earns $300 for 30 hours @ $10.00/hour – the rate of pay over both periods is a single rate of $10.00/hour regardless of whether total wages varied over the two pay periods). But if an employee is to receive different types of pay (e.g., hourly wage plus commission), the rate for each type and basis of pay must be provided in the notice (e.g., $10.00/hour and commission of 5% of sales per each item sold by employee). If any part of the pay (wage) is ascertained by some other method of calculation, then basic information for calculating that rate must be provided in the notice (e.g., 10% commission for each item employee sells plus 2% shared bonus for department’s monthly gross sales divided by number of employees in department). The notice must accurately inform employees of all applicable rates of pay determinable at the time the notice is to be provided that the employee will receive under his or her employment.
Section 2810.5 also requires inclusion of “any rates for overtime, as applicable.” Simply stating the multiplier for overtime (e.g., 1½ and/or double the regular rate) does not specify an overtime rate. When providing information regarding applicable overtime rates, only rates known and determinable must be specifically provided to the employee. By law, overtime rates are required to be based upon a “regular rate of pay” which has a special meaning in calculating statutory overtime compensation for hours worked over 8 in a day or 40 in a week (Labor Code 510, IWC Orders §3). Where an employee receives only an hourly pay rate (wage), the hourly pay is the regular rate of pay (as long as it is at least equal to minimum wage) for purposes of overtime. If the employee receives other types of pay (other than the hourly pay such as supplementary commissions, bonuses, or piece rates), such other pay must be included in determining “the regular rate of pay” for purposes of overtime compensation. In such cases, it is sufficient that an employer provide the minimal overtime rate based upon a multiplier of 1½ or double times the hourly rate and also indicate that such specified overtime rate is subject to upward adjustment when other specified forms of wages are earned during the applicable pay period (e.g., “Overtime Rate: At least $15.00/hour (1½ times regular rate) & $20.00/hour (double time rate), subject to upward adjustment based upon earned commissions (10% of sales) and bonus (2% of department gross sales)”). This is allowable because statutory overtime is based upon a “regular rate of pay” which includes all wages earned during the period of time for which overtime compensation is determined as applicable under statute. Only in this context may an overtime rate vary and not be subject to ascertainment for a specific overtime rate. Of course, an employer may provide overtime rates above the statutory rates which may be specified in the notice if ascertainable at the time the notice is to be provided, but all rates of pay (wages) must in combination comply with statutory and regulatory requirements for overtime compensation. More specific information for determining the “regular rate of pay” for overtime compensation under various scenarios is available in the DLSE Enforcement and Interpretations Manual, §49 “Computation of Regular Rate of Pay and Overtime Compensation” available on this website. (Question and Response updated 3/11/16)
October 2018
Tags: California, Wage Theft Prevention Act