California Overtime & Hours
How does a flat bonus change the overtime rate in California?
By the WeERM Editorial Team
Alvarado v. Dart Container (2018) held a flat-sum bonus is divided by the non-overtime hours actually worked in the pay period — not by all hours — and the resulting per-hour value is multiplied by 1.5 for overtime, not 0.5. The federal formula produces a smaller number and is wrong here.
A flat-sum bonus is one whose amount does not vary with hours worked — an attendance bonus, a weekend-shift bonus, a flat monthly amount. Because it is compensation for work, it enters the regular rate on which overtime is computed, and how it enters is the whole question.
The federal approach divides such a bonus by all hours worked in the period, including overtime hours, which dilutes it. California rejected that. Under Alvarado the divisor is the number of non-overtime hours the employee actually worked in the pay period.
The multiplier differs too. Having divided by non-overtime hours only, the per-hour value of the bonus is multiplied by 1.5 for each overtime hour rather than by an additional 0.5. Both halves of the formula move in the employee's favour relative to the federal method.
Two practical points. The court applied the formula retroactively, so a payroll system configured to the federal method has been producing a shortfall for as long as it has been running. And the rule is specific to flat-sum bonuses — a production or commission-style bonus that varies with hours or output is calculated differently.
Sources
Reviewed 2026-08-10 by the WeERM team. Informational only, not legal advice. California rules change; confirm against the current source before acting.