In California, the “regular rate of pay” is a term of art. Calculating it is not necessarily straightforward and much of the law in this area is counterintuitive, so employers should familiarize themselves with the basics to prevent missteps that can result in significant derivative penalties. An employee’s regular rate of pay provides the basis for overtime compensation and meal and rest period premium payments for nonexempt employees. Cal. Lab. Code § 510; Ferra v. Loews Hollywood Hotel, LLC, S259172 (Cal. July 15, 2021). Employers sometimes erroneously believe that a nonexempt employee’s hourly wage is the employee’s regular rate of pay. While the regular rate of pay can sometimes be the same as an nonexempt employee’s hourly wage, the correct answer is often more complex, and a series of formulas is required to derive a rate capturing all renumeration for hours worked by an nonexempt employee. Here is a refresher on how an employer should derive an employee’s regular rate of pay for a few common compensation types on a weekly basis.
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