Seyfarth Shaw LLP | www.seyfarth.com Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) 93 XII. Regular Rate of Pay The “regular rate of pay” is the basis for overtime compensation under the FLSA, as well as overtime, meal and rest period premiums, reporting time pay, and statutory paid sick leave under California law.457 It is often a complex formula that includes all remuneration provided for hours worked, as well as amounts paid for being available to work. Other amounts are statutorily excluded from the regular rate. In most instances, the regular rate of pay is calculated by adding all remuneration for employment except for statutory exclusions in any workweek and dividing that amount by the total hours worked by the employee in the workweek. However, employers should not be lulled into overlooking the significant complications that can arise depending on the pay schemes used. A. What is Included (and Excluded) The regular rate of pay includes all amounts that an employee is paid for performing work, including hourly pay, shift differentials, salaries, piece rates, commissions, and most bonuses. It can include non-cash payments like meals, store gift cards, prizes, and contest awards, where these amounts are paid on a non-discretionary basis. The regular rate of pay also includes amounts paid for being available to perform a duty, such as time spent oncall, even where the on-call hours are not considered hours worked.458 Fortunately, certain amounts can be excluded from the regular rate. For example: Gifts. Amounts paid as true gifts on special occasions and which are not dependent on hours worked, production, or efficiency are excluded from the regular rate. Payments for When No Work is Performed. Payments made for occasions when an employee performs no work—e.g., vacation, holiday, or sick time—are similarly excluded from the regular rate. Premium Payments. Premium payments for overtime, failure to provide a meal or rest period, split shifts, and reporting time need not be included in the regular rate of pay. However, overtime and meal and rest period premiums must be paid at the regular rate of pay. Reimbursements. When an employee incurs expenses on his or her employer’s behalf, payments made by the employer to cover such expenses are not included in the employee’s regular rate so long as the amount of the reimbursement reasonably approximates the expense incurred. 457 The regular rate of pay is one of few areas where California closely tracks federal law. With few exceptions, the manner of calculating the regular rate of pay is the same under the California Labor Code and FLSA. However, California differs in its application of the regular rate. Under federal law, the regular rate must be calculated only for purposes of paying overtime. 29 U.S.C. § 207(a). Under California law, the regular rate must also be used for paying meal and rest period premiums and sick leave. Ferra v. Loews Hollywood Hotel LLC, 11 Cal. 5th 858 (2021) (meal and rest period premiums); Cal. Lab. Code § 246(l)(1) (sick pay). 458 Payments for uncontrolled standby time are subject to an additional complication with regard to the regular rate of pay. This is because payments for uncontrolled standby are included in calculating the regular rate of pay, but the hours for which the payment is made are not included in the divisor of the calculation. DLSE Manual § 47.6.2.
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