California Court of Appeal Approves of Wage Statements Listing Overtime Separately

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The California Court of Appeal has held in General Atomics v. Superior Court of San Diego County that wage statements listing overtime premiums separately to show “0.5 times the regular rate of pay rather than 1.5” do not violate the California Labor Code. In doing so, the court took the unusual step of issuing a writ directing a trial court to issue summary adjudication.

Competing Methods of Displaying Overtime Payment Amounts

California Labor Code Section 226 requires employers to furnish non-exempt employees with itemized wage statements accurately depicting “all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee.” Cal. Lab. Code § 226(a)(9).

Instead of listing overtime hours in a single entry compensated at 1.5x the regular rate of pay, the wage statements issued by General Atomics to plaintiff Tracy Green listed overtime hours twice: “once for the standard contractual rate and once for the overtime premium,” with the latter showing the overtime rate as 0.5x the regular rate. Though the plaintiff acknowledged that this method accurately displayed the total payments ultimately received, she nonetheless alleged that it did not accurately depict the 1.5x overtime rate or allow employees to easily calculate it, asserting a class claim under Section 226 and a claim under the Private Attorneys General Act (PAGA).

Effectuating the Underlying Statutory Purpose

Following denial of its motion for summary adjudication, General Atomics sought a writ from the Court of Appeal, which ultimately issued one determining not only that General Atomics’ method of calculation complied with the Labor Code, but also that the plaintiff’s proposed alternative “makes it more difficult for an employee to calculate the statutory regular rate of pay and the statutory overtime rate.” Providing multiple charts to illustrate the competing approaches, the court explained that this was particularly true in instances where employees had multiple standard hourly rates during the same pay period.

The court emphasized “[t]he core purpose of section 226 is to ensure an employer document[s] the basis of the employee compensation payments to assist the employee in determining whether he or she has been compensated properly,” determining that General Atomics’ method did exactly that. While noting that “other formats may also be acceptable,” the court held that “given the complexities of determining overtime compensation in various contexts, the format adopted by General Atomics adequately conveys the information required by statute. It also allows employees to readily determine whether their wages were correctly calculated, which is the central purpose of section 226.”

California employers should, of course, take care to ensure that all compensation is fully documented and accurately reflected in wage statements. Following this decision, separately listing overtime payments, as General Atomics has done, is one way to accomplish this.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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