Gold's Gym Employees Are Flexing Their Muscles -- The Regular Rate of Pay

Gold's Gym was recently hit with a lawsuit by employees who claim, among other things, that their commissions and bonuses were not included in calculating their overtime compensation.  It is the "regular rate of pay" (RRP), not the hourly rate of pay, that is the basis calculating overtime.  This raises an issue every employer must address -- What payments must be included in calculating the RRP?

All sums paid for hours worked must be included in calculating the RRP.  Piece work, commissions, production bonuses, on-call premiums, as well as the hourly rate of pay or salary, must all be included in calculating the RRP.  Gifts, or bonuses not tied to production, vacation or sick time and retirement plan contributions are excluded from calculating the RRP. 

Once the RRP is calculated, overtime compensation can be determined.  A California employer must compensate employees either 1.5 times or two times the RRP for each overtime hour worked.  The calculations can be difficult to make, particularly where the bonus or commission is earned over a period of time (maybe even one year).  Thus, I suggest working with an attorney to help calculate the RRP for employees who earn commissions, piece rates or production bonuses. 

Failure to properly calculate overtime subjects an employer to liability for non-payment of wage, liquidated damages and attorneys' fees.  These amounts can be substantial.  An employer's best practice is to evaluate its pay practices and make appropriate changes so that it is paying overtime based on the RRP.