Paying overtime on holidays in California can be tricky. A recent court confirmed the proper premium rate.
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WAGE & HOUR UPDATE
Happy 4th! Don’t Sue Me!
Employer Wins Holiday Pay Lawsuit
By Christopher W. Olmsted
When you are oo-ing and ah-ing at fireworks this weekend, remember that some people have to miss the show because of a work shift.
But don’t feel too bad. Some employers pay a “holiday premium rate” to compensate employees for working on a holiday. Usually the rate is 1.5 times the employee’s regular hourly rate. But if an employee works overtime on the holiday, what is the proper overtime rate?
A California appellate court in a case titled Roman v. Advanced-Tech Security Services, Inc. answered that question.
Ester Roman worked as a security guard for Advanced-Tech. The company handbook provided for premium pay at the rate of 1 ½ times the regular rate for guards who worked on holidays.
During the week of September 4, 2006, Ms. Roman worked the following hours:
Monday Labor Day: 12
Tuesday: 12
Wednesday: 12
Thursday: 8
Friday: 8
Saturday: 8
Total hours: 60
Advanced-Tech paid Ms. Roman as follows:
Total regular hours paid: 40
Total premium (1.5) hours paid: 20
Ms. Roman thought she had been shortchanged. On Labor Day, she worked 8 hours at the 1.5 holiday rate, and then worked 4 hours of overtime, for which she also received 1.5 times her regular rate. She contended that the overtime rate paid for the four hours of overtime worked on Labor Day should have been time-and-a-half of the holiday premium rate. In other words, she wanted a premium on the premium rate. The employer disagreed. Advanced Tech reasoned that it was already paying Ms. Roman at 1.5 her regular rate on account of the holiday, and it did not need to pay an additional premium on top of that for overtime worked on the holiday.
Ms. Roman sued. When the company filed a motion for summary judgment to end the case, the trial court ruled in favor of Ms. Roman. But on appeal, the appellate court sided with the employer and reversed the ruling.
The appellate court looked to Labor Code section 510, subdivision (a). That section mandates that an employer pay an employee time and one-half for (1) more than 8 hours of work in one workday, and (2) more than 40 hours of work in any workweek. So the question is: time and one-half of what? The regular pay rate or the holiday premium rate?
Section 510 did not support Ms. Roman’s claim, said the court. “There is nothing in section 510 to suggest that the Legislature intended to deem premium holiday pay, voluntarily offered by the employer, as regular pay,” observed the court.
The court found analogous support for the conclusion in federal law. Under the FLSA, holiday pay does not factor into calculating the regular rate. According to federal law, the “regular rate” of pay includes all “remuneration for employment,” subject to several exceptions, including “extra compensation provided by a premium rate paid for work by the employee on Saturdays, Sundays, holidays, or regular days of rest, or on the sixth or seventh day of the workweek, where such premium rate is not less than one and one-half times the rate established in good faith for like work performed in nonovertime hours on other days.” (29 U.S.C. §§ 207(e)(1), 207(e)(6).)
Additionally, noted the court, the Department of Labor regulations which interpret the FLSA expressly state that time and one-half holiday pay may be treated as overtime pay.
Although California’s Labor Code does not include these express exceptions, the appellate court reasoned that by way of logic and analogy, the holiday premium exception ought to be read into California law.
In short, the company did not have to pay Ms. Roman an overtime premium based on the holiday premium rate.
It was essential that the holiday rate of 1.5 times the regular rate matched the overtime rate. Had the company paid a lesser holiday premium (say 1.3 times the regular rate) it is unlikely the court would have credited the holiday rate as overtime.
Practical Tips:
If your company pays a holiday premium rate, consider paying a rate of 1.5 times the overtime rate so that overtime hours worked on the holiday can be paid at the same rate.
Note that this is a special exception, and that other types of compensation (certain bonuses, commissions) and premium rates (some shift differentials) may have to be included in the “regular rate” for the purposes of overtime. Seek legal advice because overtime errors are costly.
Also consider stating in the employee handbook that overtime worked on a holiday will be paid at the same 1.5 rate. That way the company can eliminate allegations that it made a contractual promise to pay a higher rate for holiday overtime. In this case, the court passed on this question because it had not been properly raised as a legal issue. However, it is likely that a simple provision in the handbook would have prevented this lawsuit.
Chris Olmsted is available to answer wage and hour questions, help employers maintain compliance with employment laws and defend against claims.
More Legal Update articles.
Download entire July 2008 Legal Update in PDF format.
This article is intended as a brief overview of the law and are not intended to substitute as legal advice. Any questions or concerns regarding any statute or case law should be addressed to a licensed attorney. Copyright © 2008 by Barker Olmsted & Barnier, APLC. San Diego, California. All rights reserved.
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