ALVARADO v. DART CONTAINER CORPORATION OF CALIFORNIA

Appellant’s Petition for Review

Cal.February 23, 2016

ey SUPncME COURT COPY $23260% IN THE SUPREME COURT OF CALIFORNIASUPREME COURT FILED HECTOR ALVARADO FEB 2 3 2016 Plaintiff, Appellant and Petitioner Frank A. McGuire Clerk Vs. | - Deputy DART CONTAINER CORPORATION OF CALIFORNIA Defendant and Respondent AFTER A DECISION BY THE COURT OF APPEAL FOURTH APPELLATE DISTRICT CASE NO. E061645 PETITION FOR REVIEW (Service on Attorney General and District Attorney required by Bus. & Prof. Code §§ 17209, 17536.5) LAVI & EBRAHIMIAN DENNIS F. MOSS Joseph Lavi (SBN 77512; (SBN 209776;jlavi@lelawfirm.com) dennis@dennismosslaw.com) Jordan D.Bello 15300 Ventura Blvd., Suite 207 (SBN 243190; jbello@lelawfirm.com Sherman Oaks, CA 91403 8889 W. Olympic Blvd., Suite 200 Tel: (310) 773-0323 Beverly Hills, CA 90211 Fax: (310) 861-0389 Tel: (310) 432-0000 Fax: (310) 432-0001 ATTORNEYSFOR PLAINTIFF, APPELLANT AND.PETITIONER HECTOR ALVARADO IN THE SUPREME COURT OF CALIFORNIA HECTOR ALVARADO Plaintiff, Appellant and Petitioner VS. DART CONTAINER CORPORATION OF CALIFORNIA Defendant and Respondent AFTER A DECISION BY THE COURT OF APPEAL FOURTH APPELLATEDISTRICT CASE NO. E061645 PETITION FOR REVIEW (Service on Attorney General and District Attorney required by Bus. & Prof. Code §§ 17209, 17536.5) LAVI & EBRAHIMIAN DENNIS F. MOSS Joseph Lavi (SBN 77512; (SBN 209776;jlavi@lelawfirm.com) dennis@dennismosslaw.com) Jordan D. Bello 15300 Ventura Blvd., Suite 207 (SBN 243190; jbello@lelawfirm.com Sherman Oaks, CA 91403 8889 W.Olympic Blvd., Suite 200 Tel: (310) 773-0323 Beverly Hills, CA 90211 Fax: (310) 861-0389 Tel: (310) 432-0000 Fax: (310) 432-0001 ATTORNEYSFOR PLAINTIFF, APPELLANT AND PETITIONER HECTOR ALVARADO TABLE OF CONTENTS ISSUES PRESENTED 000000oo.cccccccccccsssssssssssssseteecececceeeseecececcesesetesen 1 INTRODUCTION..0.....csscccsssssscscsssssssssesssstesetteeteeeeeeeecc 2 STATEMENTOF CASEoesssossossseeteceteeeeeeeee 7 L. FACtS weeesccsssssssecssssssnmeeesesssssssssssussssssssusseseesessssssssassssssateesssssasasaseseescecssss 7 2. Proceedingsin the Trial Court......cccsssssssssscsssssssssssssesesessstteeeeesesseecccce 10 ARGUMENT-REASONSFOR GRANTING REVIEW... 12 1. | REVIEW OF THE CONFLICT BETWEEN THE COURT OF APPEAL'S RULING AND AUTHORITY THAT PRECEDEDIT IS OF VITAL IMPORTANCE TO WORKING MEN AND WOMENIN CALIFORNIA......c.ccscsccsscscssessesscesesessecsesseevevcece 12 2. THE COURT OF APPEAL'S DECISION CONFLICTS WITH A 1957 ATTORNEY GENERAL OPINION THAT INFORMED FUTURE WAGEORDERSTHAT DID NOT ADOPT THE "FLUCTUATING WORKWEEK" CALCULATION MODEL..17 3. THE COURT OF APPEAL'S DECISION HEREIN CONFLICTS WITH "FINDINGS" OF THE IWCwo... ceccccccsscscessscccesseveseecees. 19 4. THE COURT OF APPEAL'S DECISION CONFLICTS WITH CALIFORNIA APPELLATE COURT, STATUTORY, AND OTHER AUTHORITY THAT PREDATEIT...ceccceeeeeeee 20 A. The Court of Appeal's Ruling Conflicts with Skyline Homes......... 20 B. Cases that Followed Skyline Are Also in Direct Conflict With The Court of Appeal's DecisioneCeeteneees 23 C. This Court Acknowledged California's Rejection of "Fluctuating Workweek" Calculations In Ramirez v. Yosemite Water (1999) 20 Cal.4th 785. .....cccssssssesssssssssessssssesssssasssssessuussssasssssssussseneeeseeeene 25 D. The Court of Appeal Decision Herein Conflicts with the Codification of Skyline in Labor Code 515 (d)........secssssssststessesessse 25 E. The Court ofAppeal's Decision Is In Direct Conflict with Marin v. Costco Wholesale Corp's . (2008) 169 Cal.App.4th 804, 817-818 Analysis of Skyline in the Context of a Wage Schemethat Includes a Flat Rate "BOMUS" ooo... cecececesceeceseseseesssessesesusacssesevessusseatestreavavevevsesers 26 F. The Court ofAppeal's Decision Conflicts with the DLSE's Valid Interpretation of How Overtime Should Be Calculated, an Interpretation that, Contrary to the Court's View, Aligns With Statutory and Appellate Authority Expressly Referencedin the Manual..eveeeaes 28 G. The Court of Appeal's Decision Conflicts with Huntington Memorial v. Superior Court (2007) 131 Cal.app.4th 893oe. 30 5. THE COURT OF APPEAL'S RELIANCE ON 29 CFR 788.209(a) CONFLICTS WITH FEDERAL REGULATIONS THAT DIRECTLY APPLY TO DART'S COMPENSATION SCHEME.32 CONCLUSION ooo...ooocceeccsssssssesssessesssessstsssssssaresssessersestisseteeeeeeesecc 36 TABLE OF AUTHORITIES Cases Alcala v. Western Ag Enterprises (1986) 182 Cal.App.3d 546......... 3, 23, 24 California Manufacturers Assn. v. Industrial Welfare Com. (1980) 109 Cal.App.3d 95, V1 o.oo. cesesscsssssssssessssssssssssssssssssssssseteeeecccc veseesesees 22 Ghory v, Al-Laham (1989) 209 Cal.App.3d 1487, 1490-1491... 3, 24 Hernandez v. Mendoza (1988) 199 Cal.App.3d 721,728...3, 23, 24 ofuntington Memorial v. Superior Court (2007) | 131 CalApp.4th 893 ooo... ccccccscsssssssesssumsessesssssteseseeeeseeceeccc4, 30, 31 Industriai Welfare Com. v. Superior Court (1980) 27 Cal.3d 690....... 22, 30 Lujan v. Southern California Gas Co. (2002) 96 Cal.App.4th 1200...... 3, 24 Marin v. Costco Wholesale Corp. (2008) 169 Cal.App.4th 804 ooo cccccccccsssssssessesesssssssssssssseesessseeesecccc. 4, 5, 26, 27 Ramirez v. Yosemite Water(1999) 20 Cal.4th 785.000. ccccccccsceceeccsess:. 3, 25 Skyline Homes, Inc. v. DepartmentofIndustrial Relations (1985) 165 Cal.App.3d 239 o.oo cecsccscssssscsssssssvessssnustnssieiiissssstssseeeeeeesee passim Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal. 4th 557 ...cccccccsssssssssessssssssnsssssestissssusssieisteeeececcc 20. 25 Walling v. Hardwood Co., supra, 325 U.S.at p. 424 oocccccccccseceecccc. 31 Statutes 29 USC 207(€)(5).oeeessecsssssssssssvesssnsssssarevssessssessssstieeceeteeeeeeseeecc e 35 Businessand Professions Code section 17200 et Sq. ...ceceeccccccssssscceseeescc 11 Labor Code 201, 202, and 203..0....cceccceccccssusssssseseessssseesestseseeeseeccc. 11 Labor Code 515 (d) oo... iecessssssssssssssssesvsresstssassssssssasestesreseseeteeseeeseccc 25, 28 Labor Code section 226 .0.......cccccccssssssssssssssssssssesssessresssssrsesteeseeseeseeesccc, 11 Labor Code section 2698 et S€q........ccccccccsscssssssesssssssesssesssssssesseeseeeeeesccc.., 11 Other Authorities 29 Ops. Attorney General, Opinion NO. 57-29, pg. 168-172... 2,17 Private Attorneys’ General Act of 2004.00... cccccccsccscsssssseessessesseeeeeseecccccun, 11 Wage Order No. Lo... ieccccssessessessessesvsssesssssusssussseasessessesssereuseesseceseesccs 12 Regulations 29 CER § 778.203 ....ceccscsssssssssssussssssecsstsssisssessssssssesesestsssssescesseeees 1, 34, 35 29 CFR § 778.500(b)......ccccssssssessssessssessasessussssssssssisssstesssteseseeessseesceccc. 32 29 CER § 778.502 ..ecseccsssssssssssssssssesssrssssssesssssesssssssvessstesssstsceseecesese 1, 33, 34 29 CFR § 788.209(a)...sccsscssssssssssssessssecsssecssessssssssiessesesseeseceesece 1, 32, 33, 34 ISSUES PRESENTED Theissues presented for review are: 1. | Under California law, how must an employer calculate the "regular rate" for the purpose of determining overtime pay whena weekly wage has an hourly wage component and fixed amount componentthatis payable irrespective of whether or not overtime hoursare worked? 2. Can an employer, under California law, divide a flat sum component of a weekly wage by total hours worked each week (apply "fluctuating workweek" methodology) to arrive at the "regular rate" for purposes of calculating overtime, where the number of hours varies from week to week, causing the overtime rate to decrease each week that the amount of overtime work increases? 3. Does California law require an employer to divide a flat sum component of a weekly wage by the maximum numberof non-overtime hours for the week (e.g. 40 hours) in determining the "regular rate" to be utilized in calculating overtime? 4, If California law is indeed silent on how to calculate overtime when flat sums called "bonusesare paid as part of a weekly wage, was the Court of Appeal's application of 29 CFR 788.209 (a) wrong, given the provisions of 29 CFR 778.502 and 29 CFR 778.203. INTRODUCTION The Court of Appeal issued a decision that threatens to Sweep away, in one stroke, years of firmly-established California case law that distinguishes the Federal means of calculating overtime for employees from California's means of calculating overtime when an employee's wages include a fixed salary component that is paid irrespective of whether overtime is worked. The Slip Opinion is attached hereto. Review is imperative to protect well established substantive overtime rights from forfeiture on account of a pay scheme, adopted by the Court of Appeals, that reduces, with each additional minute of overtime worked, the hourly rate upon which overtime must be calculated. The authority turned onits head by the Court of Appeal decision includes: @ 29 Ops. Attorney General, Opinion NO, 57-29, pg. 168-172 (May 15, 1957) in which the Attorney General, in responseto a question posed by the Chairman of the Industrial Welfare Commission ("IWC")! regarding application of the Federal fluctuating work week methodology for calculating overtime, unequivocally rejected that methodology, opting ' The IWC is the quasi-legislative body that sets minimum wage and overtime law. Back in 1957 its authority was limited to women and children. Since its chairman received the 1957 A.G. Opinion, the IWC has repeatedly enacted wage orders with overtime provisions not unlike those operative when the AG Opinion issued, and it has not adopted the “fluctuating work week" methodology in any of those enactments. instead for division of the salary by the regular workweek of forty hours. © Skyline Homes, Inc. v. Department of Industrial Relations (1985) 165 Cal.App.3d 239 held that the fluctuating work week methodologydoes not apply under the California Wage Orders despite its applicability under the FLSA because of the differences between California law and the FLSA, including the 8 hour day provisions of California law. e Alcala v. Western Ag Enterprises (1986) 182 CA 3d 546, 551 embraced and applied Skyline's methodology for calculating overtime and rejection of the "fluctuating work week" method. © Hernandez v. Mendoza (1988) 199 Cal.App.3d 721,728, where an employee had a fixed amount per workweek wage, the court expressly held that the Skyline overtime calculation methodology applied. © Ghory v. Al-Laham (1989) 209 Cal.App.3d 1487, 1490-1491 adopted Skyline analysis rejecting the fluctuating work week methodology in application of California overtime law. © Ramirez v. Yosemite Water (1999) 20 Cal.4th 785,795 acknowledged the continuing viability of Skyline's overtime calculation methodology, distinguishing it from the federal rule authorizing use of the fluctuating workweek methodology. @Lujan v. Southern California Gas Co. (2002) 96 Cal.App.4th 1200, upheld Skyline analysis in a context where meter readers were paid a fixed amountperroute (not per Saturday or Sunday worked as here), and found 3 that dividing fixed route pay by actual hours worked to determine "regular tate" was improper. Independentof its adoption of Skyline, the court did rule that because ofa collective bargaining agreement overtime exemption in the law, the overtime system utilized in Lujan was not illegal. Such an exemption is not available here. e Huntington Memorial v. Superior Court (2007) 131 Cal.App.4th 893. In a non-flat rate context, the Court of Appeal rejected, as inconsistent with the purpose of California's overtime requirements, a pay plan that, like the pay plan here, caused the "regular rate" to decrease the more hours of overtime worked. © Marin v. Costco Wholesale Corp. (2008) 169 Cal.App.4th 804, 817-818 where the Court of Appeal, relying on Skyline, as well as the DLSE Manual provision rejected by the Court of Appeal herein, expressly rejected application of the "fluctuating work week methodology" in calculating overtimein flat rate "bonus" contexts. Byrejecting, implicitly or explicitly, no fewer than seven decisions from other California appellate courts and at least one from this Court, the Court of Appeal has engendered substantial doctrinal confusion requiring this Court’s review. The Court of Appeal reached its unprecedented holding without grappling with the fact that it is adopting the fluctuating work week approach to a flat amount componentof a weekly wage(a "salary"in fact if 4 not in name), in the face of overfifty years of rejection of that approach-- beginning with the AG's Opinion in 1957, continuing with the Industrial Welfare Commission's rejection of the "fluctuating workweek approach in "Findings" in 19637; and the case law that followed beginning with Skyline Homes, Inc., supra, in 1985, and culminating in Marin, supra that applied Skyline to a fixed payment (i.e. salary, characterized as a "bonus" in a context where the employee,as in this case, also earned hourly wages). Theerror in the Court of Appeal's analysis stems from a focus on a "bonus" characterization of the salary element of the Dart compensation system, not substance. Respondent Dart's plan paid flat amount payments in weeks in which weekend workis performed of $15 for one weekend day worked, and $30 for two weekend days worked. Dart called these fixed amounts "bonuses". Just as easily, Dart's policies could have called these flat amounts weekly "salaries" paid in addition to hourly pay for those weeks when their workers worked on weekends. Such payments, no matter > Per the 2002 DLSE Manual: "Recent research in IWC archives has disclosed that in 1963 'Findings', the Commission stated: ‘In defining its intent as to the regular rate of pay set forth in Section 3(a)(3)(A) and (B)to be used as a basis for overtime computation, the Commission indicatedthat it did not intend to follow the "fluctuating work week" formula used in some computations under the Fair Labor Standards Act. It was the Commission’s intent that in establishing the regular rate of pay for salaried employeesthe weekly remuneration is divided by the agreed or usual hours of work exclusive of daily hours over eight.’ Thus, the DLSE position (and the Skyline court) is correct." DLSE Manual Page 48-2 5 how they arereferred to, are salaries, not unlike the salaries at issue in the cases cited above. A "salary", as opposed to an hourly wage, is a fixed amount paid to an employee, measured by day, week, month or year, irrespective of the hours worked during the pay period. Here, in addition to hourly wages, Dart's employees earned salaries of $30 or $15 in any week they worked a weekend day. The only difference between this case and cases like Skyline, Ghory, and Hernandez, the salaries in those cases were the only wages paid in those cases, and here, the employeesreceived both hourly wagesand salaries in weeks they worked on weekends. Nothing in a mixed hourly pay-salary pay wage system, makes the salary component unlike any other salary subject to California's longstanding repudiation of the "fluctuating work week" methodology for calculating overtime. The "bonus" moniker does not change the fundamental requirement of how overtime is to be calculated in California. The Court of Appeal, in adopting the fluctuating work week approach, pinnedits analysis, in part, on the fact that sections 49.2.4.2 and 49.2.4.3 of the DLSE Manual, which expressly dealt with calculating overtime in the context of flat rate "bonuses", were not expressly tied, in those sections of the Manual, to any case law or other authority dealing with overtime on flat rate "bonuses" (Slip Op.22) . Without such support, the Court of Appeal reasoned, the Manual Provisions were not law, and therefore, the court was compelled to turn to a Federal Regulation 6 purportedly dealing with overtime on "flat rate bonuses" that authorized use of the “fluctuating work week" methodology. (Slip Op.24-25) In taking this approach, the Court of Appeal ignored the California authority cited above, putting blinders on to the fact thatthe flat amount "bonus" here was, as a matter of substance, no different than flat amount salaries in the California cases that have rejected the “fluctuating workweek" approach to calculating overtime.* STATEMENT OF CASE 1. Facts Thefacts in this case are undisputed. Dart Container corporation of California ("Dart") is a producer of food service products, including cups and plates. Appellant Alvarado began working for Dart in September 2010, as a warehouseassociate, and was terminated in January 2012. (Slip Op. 2) According to defendant’s written policy, what Dart characterized as an "attendance bonus" would be paid to any employee who wasscheduled to work a weekend shift and completed the full shift. (Slip Op. 2). The policy did not differentiate between days or weeks that would trigger overtime obligations, and those that would not. (Appx.68-70) The bonus was $15 per day, for working a full shift on Saturday and/or Sunday, regardless of the number of hours, if any, worked beyond the normal * As will be demonstrated infra, the DOL Regulation the Court of Appeal turned to, was inappropriately relied on, even under Federal law. . scheduled length of a shift. (Appx. 68-70) Dart calculates the amount of overtime paid on attendance bonuses during a particular pay period as follows: 1, Multiply the numberof overtime hours worked in a pay period by the straight hourly rate (straight hourly pay for overtime hours). 2. Add the total amount owed in a pay period for (a) regular non- overtime work, (b) for extra pay such as attendance bonuses, and (c) overtime due from thefirst step. That total amount is divided by the total hours worked during the pay period. This amount is the employee’s “regular rate.” 3. Multiply the number of overtime hours worked in a pay period by the employee’s regular rate, which is determined in step 2. This amount is then divided in half to obtain the “overtime premium” amount, which is multiplied by the total number of overtime hours workedin the pay period (overtime premium pay). 4. Add the amount from step 1 to the amount in step 3 (total overtime pay). This overtime pay is added to the employee’s regular hourly pay and the attendance bonus. (Slip Op. 2-3) - During Appellant's employment, he worked some Saturdays and Sundays, including during weeks he worked overtime and sometimes double time; and therefore, was paid per Dart's policy. (Slip Op. 3) The Dart formula operates in a mannerconsistent with the fluctuating 8 work week methodology rejected by Skyline. Applying the Dart formula to a hypothetical employee who works 45 hours in a week, earns an hourly rate of $10.00 per hour, and works a Saturday and Sunday during the workweek, plays out as follows: Step 1. 5 hours of OT x $10.00 (straight rate) = $50 Step 2. (a) 40 hours of non-overtime x $10= $400 plus (b) $30.00 fixed amount, salary, for working on Saturday and Sunday plus (c) $50 from step 1 = $480. Dividing total by 45 hours =$10.66 Step 3. 5 OT hours x $10.66= $53.30 divided by 2 to get "overtime premiumamount" = $26.65 Step 4. Adding step 1 to step 3 equals overtime pay under Dart's formula of $76.65. The foregoing contrasts to the Skyline and Labor Code 515(d) approach which would entail dividing the $30 flat amount salary for the week in which Saturday and Sunday work occurred, by a non-overtime week's 40 hours = $0.75. Add the $0.75 to the hourly pay of $10 = a regular rate of $10.75 x 1.5 =$16.12 per OT hour x 5 hoursof overtime = $80.60. With an additional 5 hours of overtime, this amount would, under the Skyline and Labor Code 515(d), be doubled, equaling $161.20 in overtime pay. Under the Dart formula, approved by the Court of Appeal, an extra 5 hours of overtime would be less than double the overtime pay of $76.65 under Dart's system for 5 hours: 9 Step 1. 10 hours of OT instead of 5 x $10= $100 Step 2. (a) 40 hours of non-overtime x $10= $400 plus (b) $30 fixed amount for working on Saturday and Sunday, plus (c) $100 from step 1= $530. Dividing the total by 50 hours =$10.60. (6 cents less per hour than when amount of OT was 5 hours) Step 3. 10 OT hours x $10.60= $106. divided by 2 to get "overtime premium amount" = $53.00 Step 4. Add Step 1 to step 3 to get amountof overtime pay. $153.00--- an amount less than double the amount payable if only 5 instead of 10 hours of overtime were worked under Dart's formula. The more hours an employee works under the Court of Appeal decision, the less he or she receives per overtime hour worked. Further, the higher the flat amount component of a wage program under the system approved by the Court of Appeal, the greaterthe differential with each extra hour of overtime worked. 2. Proceedings in the Trial Court | In August 2012, plaintiff filed a complaint for damages and restitution, alleging defendant had not properly computed bonusovertime under California law. Plaintiff's complaint as amended (complaint) alleges the following causes of actions: (1) Failure to pay proper overtime in violation of Labor Code sections 510 and 1194 by not including shift differential premiums and bonuses in calculating overtime wages; (2) 10 Failure to provide complete and accurate wage statements, in violation of Labor Code section 226; (3) Failure to timely pay all earned wages due at separation of employment, in violation of Labor Code sections 201, 202, and 203. (4) Unfair Business Practices, in violation of Business and Professions Code section 17200 et seq.; and (5) civil penalties under the Private Attorneys’ General Act of 2004, Labor Code section 2698 et seq. (PAGA). (Slip Op.3-4) | Defendantfiled a motion for summary judgmentor, alternatively, for summary adjudication. Defendant argued that defendant’s formula for calculating overtime on plaintiff's attendance "bonuses", earned during pay periods in which they were earned, was lawful, and there was no legal basis for plaintiff's proposed alternative formula. Defendant further argued federal law applied to calculating overtime on the bonuses because there was no California law providing a formula for calculating overtime on bonuses. Defendant asserted that plaintiff's proposed formula is based solely on California public policy and void regulations from the Division of Labor Standards Enforcement (DLSE) Manual which have no force or effect. Defendant concluded that, since defendant’s overtime formula complies with federal law and does not conflict with state law,it is lawful, rendering the Complaint meritless. (Slip Op.4) On April 30, 2014,the trial court granted Dart's Motion for Summary Judgment. Judgment was entered thereafter, and on June 3,2014 Notice of 11 entry of Judgment wasfiled. (Appx. 143, 159) 3. Proceedings on Appeal Alvarado filed a timely appeal from the Judgment on July 31, 2014 (Appx. 165) On January 14, 2016, the Court of Appeal upheldthe judgment of the trial court in a published opinion. (Slip. Op) ARGUMENT-REASONS FOR GRANTING REVIEW 1. REVIEW OF THE CONFLICT BETWEEN THE COURT OF APPEAL'S RULING AND AUTHORITY THAT PRECEDED IT IS OF VITAL IMPORTANCE TO WORKING MEN AND WOMENIN CALIFORNIA. Wage Order No.1, codified astitle 8 California Code of Regulations section 11010(CCR), concerns the manufacturing industry and is therefore applicable in the instant case. It provides as to hourly employees that “employees shall not be employed more than eight (8) hours in any workday or more than 40 in a workweek unless the employee receives one and onehalf (1 1/2) times such employee’s regular rate of pay for all hours worked over 40 hours in the workweek. Eight(8) hours oflabor constitutes a day’s work. Employment beyond eight (8) hours in any workday or more than six 6) days in any workweekis permissible provided the employee is compensated for such overtime at not less than: (a) One and one-half (1 1/2) times the employee’s regular rate of pay for all hours workedin excess of eight (8) hours up to and including twelve (12) hours in any workday, 12 and for the first eight (8) hours worked on the seventh (7th) consecutive day of work in a workweek; and (b) Double the employee’s regular rate of pay for all hours worked in excess of 12 hours in any workday and forall hours worked in excessofeight (8) hours on the seventh (7th) consecutive day of work in a workweek.” The issues presented by this case, centering on howto calculate the “regular rate” as that term is used above, are ofvital importance to the welfare of California’s workers and to the proper administration and enforcement of California’s overtime laws. In the decision below, the Court of Appeal sanctions an employerpractice of calculating overtime pay that is extremely detrimental to workers and that has consistently been declared illegal by every other Court of Appeal decision that has had occasion to consider it. The court does so without even acknowledgingthatits decision is an abrupt and dramatic departure from established precedent; indeed, the court goes to great lengths to make it appear that it is actually following governing law,failing to recognize that a fixed rate "bonus" paid as part of the wages for a week, is not, for purposes of overtime calculation jurisprudence, any different than a fixedrate salary paid forall ofa week's work. Although the decision is rendered in the novel setting of a mixed hourly and salary payment scheme during weeks in which weekend workis performed, nowhere in the court’s opinion is there an indication that the court finds something in this fact that authorizes what the court would 13 otherwise consider an illegal practice. On the contrary, the practice is summarily treated as perfectly legal under any wage program that includes a fixed amount paid for work during a week, whether an overtime week, or not, so long as the fixed amount is characterized a "bonus". In other words, the Court of Appeal decision stands as a sub silentio, wholesale repudiation of established California law that rejects application of the "fluctuating work week" methodology to fixed weekly wage payments in overtime "regular rate" determination. Plainly, letting the Court of Appeal decision stand against the backdropofsettled legal principles poses a grave danger of paving the way for the expansion of illegal practices and the’ systematic erosion and diminution of the fundamental overtime rights protecting California’s workers. Review should be granted to resolve the conflict between the current decision and existing precedent and to prevent a process destructive of workers’ rights from taking root. Calling a "salary" within a mixed wage package that includes hourly wages, and a fixed payment, a "bonus", cannot be allowed to undermine years of authority and license employersto run roughshodoversettled principles of California Labor Law. The mischief that can occur, absent reversal, is perhaps best illustrated by an example. Underthe Court of Appeal decision, an employer can a adopt a pay scheme, for example, where a night shift nurse who normally earns $50 per houris instead paid $10.00 per hour, anda flat rate 14 "bonus" of $1600 per week for any week in which she worksat least three night shift and a total of five shifts whether or not overtime is worked during the week. At $50 per hour, or $10 per hour plus a $1600 bonus, the nurse would earn $2,000 for a 40 hour week. At $50 per hour, if she worked overtime, her time and one half overtime rate would be $75 per hour. However, at $10 per hour plus a $1600 bonus, under the Court of Appeal decision herein, she would have a varying regular rate for overtime that diminishes with each hour of overtime worked. For example, under the Court of Appeal decision at 45 hours worked in a week, the regular rate would be $10.00 per hour on the $10 per hour hourly portion of her wages, and $35.55 ($1600 divided by 45 hours) per hour ontheflat-rate portion of her wages for a regular rate of $45.55 per hour [$10 per hour + 35.55 per hour] and a time and one half rate of $68.32 per overtime hour, as opposed to the $50.00 per hour regular rate, and $75.00 per hour overtime rate she would receive if her wage wasstrictly $50.00 per hour with no fixed salary/bonus. If, instead of 45 hours worked, she worked 48 hours, her "regular rate" under the Court of Appeal decision would go down further, $10 per hour plus $33.33 ($1600 divided by 48 hours) = a regular rate of $43.33, and a time and one halfrate of $63.99. | The above hypothetical represents application of the “fluctuating work hours” methodology approved by the Court of Appeal in this case, and rejected by the court of appeal in Skyline Homes, Inc., supra 165 15 Cal.App.3d 239 over 30 years ago. Therationale at the heart of Skyline, emphasizing the "penalty" purpose of California overtime law, and how an overtime system that reduces overtime rates the greater the amount of overtime worked is not consistent with that purpose,is a rationale just as relevant to a “salary” of $30 a week in a wage plan thatalsoincludes hourly pay, as it is in context wherethe only pay is a weekly “salary”, and just as relevant when the fixed amountpaid is characterized a "bonus". Under the Court of Appeal sanctioned practice, as demonstrated above, the employerpaysits employeesa flat weekly ordaily sum to cover a portion of wages that encompasses both the non-overtime and overtime hours that the employee works. The employertreats the flat sum as straight time compensation for both the non-overtime and overtime hours, and calculates the regular rate of pay for overtime purposes by dividing the flat sum by the total hours worked. As made clear above, under the system approved by the Court, the more overtime hours the employee works, the lower the regular rate of pay for the non-overtime hours. In effect, the employer uses the flat sum compensation it would have paid the employee had no overtime been worked, to partially discharge its premium wage rate obligation for the overtime hours. Instead of paying additional compensation, in an amount equal to the regular rate of pay plus the required premium, the employer reduces the employee’s non-overtime compensation and then reapplies that reduction toward the overtime 16 compensation it owes for overtime hours. In other words, the employer allocates the flat sum among the non-overtime and overtime hours in amounts depending on whether or not, and to what extent, the employee works overtime. As demonstrated below,this approach is contrary to nearly sixty years of authority. | 2. THE COURT OF APPEAL'S DECISION CONFLICTS WITH A 1957 ATTORNEY GENERAL OPINION THAT INFORMED FUTURE WAGE ORDERS THAT DID NOT ADOPT THE "FLUCTUATING WORKWEEK" CALCULATION MODEL As far back as 1957, Dart's method of determining "regularrate" was deemedinapplicable by the Attorney General. 29 Ops. Attorney General, Opinion No. 57-29, pg. 168-172 was written in response to the following question posed by the chairman ofthe Industrial Welfare Commission: ".. 2. Does the wording of section 3(a-1) of the Industrial Welfare Commission Orders [overtime sections] preclude payment of overtime on the basis of a ‘fluctuating work week,’ i.e., the method of determining the hourly 'regular rate of pay' by dividing the amount regularly paid during the pay period, e.g. month week, day, by the total number of hours worked during such pay period, and using the hourly amount so determined as a basis for computing overtime pay of one and one-half times the "regular rate of pay"? 17 In response, the Attorney General expressly rejected the “fluctuating work week” methodology, finding, inter alia, that the " ‘fluctuating work week' theory is entirely inconsistent with the commission [IWC]orders, and contrary to the general legislative scheme for protecting women and minors. We perceive no reason to more clearly spell out a prohibition against that method of computing overtimein view ofour conclusionthatit does not meetthe legal requirements of the present commission orders." In reaching this conclusion, the AG analyzed the meaning of "regular" inthe context of a Wage Order that defined the workday as 8 hours and work week as 40 hours. The AG also referenced the fact that Federal Courts have adopted the "fluctuating work week" approach in application of the FLSA, not California overtime law. Jd, pgs.170-172. In Skyline Homes, supra 165 Cal.App.3d at 252-253, the Court remarked asto the 1957 A.G. Opinion: "The opinion wasissued in May 1957 in response to a question from the IWC as to whether languagein a wage order which wasa precursor to wage order 1-76 precluded payment of overtime on the basis of a fluctuating workweek and, if not, whether the IWChad authority to modify that wage order to prohibit the fluctuating workweek methodifit wishedto. The Attorney General’s opinion stated that the fluctuating workweek method wasinconsistent with the IWC wage orders. The IWC, on notice of the Attorney General’s May 1957 opinion, enacted regulations shortly 18 thereafter without expressly permitting the fluctuating workweek and has continued to omit permission of that method of computing overtime compensation from subsequent wageorders.It seems apparent that, correct or incorrect, the IWC relied on the Attorney General’s opinion and did not consider it necessary to add language specifically prohibiting the fluctuating workweek." Consistent with the above conclusion in Skyline, and since the 1985 decision in Skyline, the IWC has continuedto adopt Wage Orders without including the "fluctuating work week" methodology in them, thereby reinforcing the inapplicability of that methodology. | Had the IWC intended to adopt the “fluctuating workweek” methodology after the AG Opinion, andafter Skyline, it necessarily would have expressly done so in the Wage Orders it adopted thereafter---having been on notice of the AG’s Opinion and Skyline. 3. THE COURT OF APPEAL'S DECISION HEREIN CONFLICTS WITH "FINDINGS" OF THE IWC | In 1963, the IWC madeclear in "Findings"relative to its regulatory authority, that the "fluctuating workweek" methodology wasantithetical to the overtime provisions in IWC Wage Orders: "Recent research in IWC archives has disclosed that in 1963 ‘Findings’, the Commission [IWC] stated: 'In definingits intentas to the regular rate of pay set forth in Section 3(a)(3)(A) and (B) to be used as 19 a basis for overtime computation, the Commission indicated thatit did not intend to follow the "fluctuating work week" formula used in some computations under the Fair Labor Standards Act. It was the Commission’s intent that in establishing the regular rate of pay for salaried employees the weekly remuneration is divided by the agreed or usual hours of work exclusive of daily hours over eight.' Thus, the DLSEposition (and the Skyline court) is correct." DLSE Manual Page 48-2 (emphasis added) | Such findings of the IWC,is an unequivocal indicator of the intent of that quasi-legislative body in using the words "regular rate" in its overtime provisions, an intent that has not changed since those 1963 findings. — 4. THE COURT OF APPEAL'S DECISION CONFLICTS WITH CALIFORNIA APPELLATE COURT, STATUTORY, AND OTHER AUTHORITY THATPREDATEIT. A. The Court of Appeal's Ruling Conflicts with Skyline Homes In 1985, in the watershed case of Skyline Homes, supra 165 Cal.App.3d 239 (“Skyline”) disapproved on other grounds Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal. 4th 557, the court held that the formula approved by the Court of Appeal herein was repugnant to California’s overtime laws and illegal. Skyline Homes, supra 165 Cal.App.3d at passim. By agreeing with and adopting the DLSE's 20 overtime calculation formula, the court concluded that California law did not countenance a practice that progressively reduced the employee’s regular rate of pay for non-overtime hours whenever the employee worked overtime and used that reduction to partially discharge the employer’s premium wage rate obligations for the overtime hours. Skyline Homes, supra 165 Cal.App.3d at 244-249, 254. Such a practice was contrary to California’s core polices of discouraging and penalizing overtime work, and of requiring the employer, not the employee, to bear the costs of the additional compensation due for the overtime work hours. Skyline Homes, supra 165 Cal.App.3d at 249. The court held that no part of the flat sum could serve to compensate the employee for the overtime hours and that the flat sum constituted compensation solely for the non-overtime hours. Skyline Homes, supra 165 Cal.App.3d at 244-245, where the applicable approved formula is spelled out. Thus, the regular rate of pay was required to be calculated by dividing the flat sum solely by the maximum legal non- overtime hours of 40 hours per week. Jd. In expressly rejecting the fluctuating workweek methodology, Skyline compelled employers to use additional funds exclusive ofthe flat sum (salary) to pay the premium wage rates due for the overtime hours. Skyline rejects the idea of a calculation system that causes the amount paid for overtime to decrease the more overtime worked because, as opposed to the "dissimilar" Federal statutory scheme, employers benefit 21 by the decreasing rate for overtime pay, and are not penalized for working their employee more overtimeas the amountof overtimeincreases. "[I]n California overtime wages are also recognized as imposing a premiumor penalty on an employer for using overtime labor, and that this penalty applies to excessive hours in the workday as well as in the workweek." "In Industrial Welfare Com. v. Superior Court (1980) 27 Cal.3d 690, 166 Cal.Rptr. 331, 613 P.2d 579, the California Supreme Court upheld the Wage Statement of Basis of wage order 1-80, which stated in part as follows: ‘ “The Commission relies on the imposition of a premium or penalty pay for overtime work to regulate maximum hours consistent with the health and welfare of employees covered by this order."””’Skyline, supra 165 Cal.App.3d at 249. The foregoing rationale applies whether a fixed amount of pay is | called a "salary" or "bonus". The Court of Appeal herein offered no argument to the contrary. Skyline went on to hold: "Premium pay for overtime is the primary device for enforcing limitations on the maximum hours of work in California. (California Manufacturers Assn. v. Industrial Welfare Com. (1980) 109 Cal.App.3d 95, 111)... In view ofthe dissimilar language and purpose ofthe California statute and regulation [compared to the FLSA], we conclude that the DLSE hascorrectly interpreted wage order 1-76 to 22 preclude the use of the fluctuating workweek method of overtime compensation." Skyline, supra 165 Cal.App.3d at 250. Nothing in Skyline suggests that there is an exception when the "fluctuating workweek method of overtime compensation"is applied to a fixed wage called a "bonus"instead of a "salary". B. Cases that Followed Skyline Are Also in Direct Conflict With The Court of Appeal's Decision Herein The cases that have followed Skyline, and have cited it as binding authority, have been equally explicit in stating that a flat sum only provides compensation for an employee’s non-overtime work hours and cannot in any manner be treated as compensation for overtime work. "(T]he trial court properly concluded that... Alcala’s monthly salary did not serve to compensate him for the overtime hours worked in excess of the hours set forth in wage order 14-80."Alcala v. Western Ag Enterprises, supra, 82 Cal.App.3d at p. 551. Alcala expressly adopts the Skyline calculation methodology and rejects the fluctuating workweek methodology. /d, at 551 "[T]he $300 per week compensation earned by appellant from November 1983 through July 1984 must be construed as the payment he received for a regular workweek. . . . [A] fixed salary does not’ serve to compensate an employee for the number of hours worked under statutory overtime requirements." Hernandez v. Mendoza, supra, 199 Cal.App.3d at 23 725. “We,... agree with appellant that the law governing the appropriate method of calculating overtime wages is contained in Skyline Homes, Inc....”. Hernandez, supra 199 Cal.App.3d at 728. "We have already stated the general rule that a fixed salary for an regular workweek does not compensate an employee for Statutory overtime work...." Ghory v. Al-Lahham, supra, 299 Cal.App.3d at p. 1491.) “ [T]he law governing the appropriate method of calculating overtime wages [under wage order No. 7-80] is contained in Skyline Homes, Inc. v. DepartmentofIndustrial Relations (1985) 165 Cal.App.3d 239, [citation].’ (Hernandez v. Mendoza, supra, 199 Cal.App.3d at p. 728)” Ghory, supra 299 Cal.App.3d at 1490. "Skyline has been followed in Alcala v. Western Ag Enterprises (1986) 182 Cal.App.3d 546, Hernandez v. Mendoza (1988) 199 Cal.App.3d 721, and Ghory v, Al-Lahham (1989) 209 Cal.App.3d 1487.It is clear that Skyline remains goodlaw with respect to the proposition that the State may use its own definition of “regular rate” and may set its own standards regarding the adequacy ofovertimepay aslong asit does notfall below the federal standards." Lujan, supra 96 Cal.App.4th 1200, 1209. | H | Hf 24 C. This Court Acknowledged California's Rejection of "Fluctuating Workweek" Calculations In Ramirez v. Yosemite Water (1999) 20 Cal.4th 785, In Ramirez v. Yosemite Water (1999) 20 Cal.4th 785 this court acknowledged the rejection of "fluctuating workweek"in the calculation of overtime as one ofthe areas indicative of state laws being moreprotective of workers’ interests than Federal law: "The IWC’s wage orders, although at times patterned after federal regulations, also sometimes provide. greater protection than is provided under federal law in the Fair Labor Standards Act (FLSA) and accompanying federal regulations... (See .... Skyline Homes, Inc. v. Department of Industrial Relations (1985) 165 Cal.App.3d 239, 247 disapproved on other grounds in Tidewater, supra, 14 Cal.4th at p. 574 [regular rate of pay for overtime purposescalculated by dividing salary by no more than 40 hours, notwithstanding federal rule authorizing use of fluctuating workweek].)" Jd, at 795 (Brackets in original). D. The Court of Appeal Decision Herein Conflicts with the Codification ofSkyline in Labor Code 515 (d) Skyline was ultimately codified in AB 60 at Labor Code 515(d) in 2001. It provides: "For the purpose of computing the overtime rate of compensation required to be paid to a nonexempt ‘full-time salaried employee, the employee's regular hourly rate shall be 1/40th of the 25 employee's weekly salary." In this case, Dart employees, in weeks they work on Saturdays and/or Sundays, in addition to receiving forty hours of pay at hourly rates, also receive salaries of $15 or $30 for the week, Per Labor Code Sec. 515 (d), determination of the "regular hourly rate" on those salaries shall be 1/40th of the salary, consistent with Skyline, not a variable amounttied into the number of overtime hours worked. E. The Court of Appeal's Decision Is In Direct Conflict with Marin v. Costco Wholesale Corp's . (2008) 169 Cal.App.4th 804, 817-818 Analysis of Skyline in the Context of a Wage Scheme that Includes a Flat Rate "Bonus" Marin, supra 169 CA4th 804, 817-818 applied Skyline analysis to contexts involving the calculation of overtime on a flat rate "bonus". Remarking on Marin, the Court of Appealherein, stated: "Nevertheless, the court in Marin indicated that the DLSE Manual section 49.2.4.2 provides a reasonable formula for calculating overtime on a flat sum bonus.'The flat sum bonus formula set forth in sections 49.2.4.2 and 49.2.4.3 ofthe Manual, which uses a divisorofstraight time, instead of total hours worked to set the regular bonus rate, and a multiplier of 1.5, rather than 0.5, to fix the bonus overtime due, produces ‘a premium based on bonus’that the DLSEbelievesis necessary to avoid encouraging the use of overtime.’ (Marin, supra, 169 Cal.App.4th at pp. 817-818). The Marin court noted that, '[i]n the case of a true flat sum bonus wherethe employee 26 cannot earn any additional bonus by working overtime hours, excluding such hours from the divisor prevents them from diluting the regular rate. Including those hours would give the employer an incentive to impose overtime because the additional overtime would reduce the cost of overtime by decreasing the regular rate—part of the situation addressed in the Skyline case. (Marin, supra, 169 Cal.App.4th at pp. 819)" (Slip Opinion at 23) The Court of Appeal decision herein, then expressed its disagreement/conflict with Marin: "Although, as indicated by Marin, the DLSE Manual section 49,2.4.2 provides a reasonable formula for calculating overtimeon a flat sum bonus, the formula has not been enacted as enforceable law and therefore this court cannot enforce it. Furthermore, enacting the formula in the DLSE Manual section 49.2.4.2 as enforceable law falls within the domain ofthe Legislature and IWC,notthis court." (Slip Opinion at 23). Obviously, Marin recognized that characterizing a flat sum paid a "bonus", irrespective of whether an employee works overtime, does not insulate the payment from application of Skyline's overtime calculation methodology when factoring that flat rate "bonus" into overtimepay. The failure of the Court of Appeal to recognize the samein this case, clearly makesreview bythis court imperative. 27 F. The Court of Appeal's Decision Conflicts with the DLSE's Valid Interpretation of How Overtime Should Be Calculated, an Interpretation that, Contrary to the Court's View, Aligns With Statutory and Appellate Authority Expressly Referenced in the Manual. The Court of Appeal goes to great lengths in an effort to explain how Section 49.2.4.2 of the DLSE Manualis not law, how that provision of the Manualdoesnotcite legal authority for the proposition stated therein; and therefore, the Court is necessarily compelled in this case to look to Federal law. (Slip Opinion 23-15). The Court of Appeal goes through this process, notwithstanding its conclusion that the formula in 49.2.4.2 is "a reasonable formula for calculating overtime ona flat sum bonus". (Slip Opinion 23). The Court of Appeal’s reasoning in this regard is not well taken. Section 49.2.4.2 ofthe DLSE Manual does not exist in a vacuum. There are two compelling reasons why the Court of Appeals repudiation of Section 49.2.4.2, and consequent reliance on a Federal Regulation is wrong. | First, there can be no question that the AG's opinion, IWC findings, Skyline, Ramirez, the other cases cited above, and Labor Code 515 (d) establish the operative methodology for determining overtime in contexts where employeesare paid a flat sum as part of wages. Secondly, 49.2.4.2 in the Manual must be read in conjunction with 28 the "Basic Overtime"provisions of the Manual, which provide the basis for the formula in that section. The DLSE Manual provides, at 49.2.4.2, consistent with Skyline: "If the bonusis a flat sum, such as $300 for continuing to the end of the season, or $5.00 for each day worked, the regular bonus rate is determined by dividing the bonus by the maximum legal regular hours worked during the period to which the bonusapplies. This is so becausethe bonusis not designedto be an incentive for increased production for each hour of work; but, instead is designed to insurethat the employee remain in the employ of the employer. To allow this bonus to be calculated by dividing by the total (instead of the straight time hours) would encourage, rather than discourage, the use of overtime. Thus, a premium based on bonus is required for each overtime hour during the period in order to comply with public policy." The Court of Appeal clearly failed to apprehend that the "public policy” referenced aboveis not pulled out of thin air, but is grounded in Skyline, the A.G. Opinion given to the IWC, andthe consistent application of Skyline's analysis in subsequent appellate decisions, referenced supra. Further, the Court of Appeal disregarded or overlooked Section 48 of the DLSE Manual, and how that section necessarily informs and provides context for the Manual Section it deemed void, 49.2.4.2. 29 Section 48 of the Manualis entitled "Basic Overtime". Section 49, that includes challenged Section 49.2.4.2 of the Manual is “Calculation of Regular Rate of Pay and Overtime”. Sections 48 and 49, given their titles and text,are inextricably related to each other, with Section 49 building off the “Basics” covered in Section 48. Section 48 details the basis of the Manual's overtime analysis and the Manual’s rejection of "fluctuating workweek", pointing out how the Manual's overtime commentary derives from Skyline, supra, and Industrial Welfare Commission v. Superior Court (1980) 27 Cal.3d 690, as well as 1963 findings of the IWC. (See DLSE Manual at 48.1.4 "Fluctuating Workweek Compensation Arrangement Not Allowed"). See also 48.1.5.lwhich points out, citing Industrial Welfare Commission, supra(1980) 27 Cal.3d 690, that California law requires a "penalty" for overtime, and "No penalty is involved in a fluctuating workweekbecausethe rate of pay actually decreases." | With Section 48.1.4 and 48.1.5.1 as a backdrop for 49.2.4.2, it was patently wrong for the Court of Appeal to disregard 49.2.4.2 as void improperlaw making tethered to nothing but "public policy". | G. The Court of Appeal’s Decision Conflicts with Huntington Memorial v. Superior Court (2007) 131 Cal.app.4th 893 Aside from conflicting with cases that deal specifically with calculating overtime in a context where a flat sum is part of wages, the Court of Appeal decision herein conflicts with Huntington Memorial, supra 30 (2007) 131 Cal.App.4th 893, a case which condemned, as antithetical to State and Federal law, any pay system that incentivized employers to work employees extra hours on account of decreasing payments per hour. The Huntington case involved hourly paid employees whose hourly rates went down the more hours they worked. Citing Federal cases, the court in Huntington pointed out: "The Supreme Court has explained: '[T]he regular rate refers to the hourly rate actually paid the employee for the normal, non-overtime workweek for which he is employed....\(Walling v. Hardwood Co. (1945) 325 U.S. 419, 424-425" Huntington, supra at 904. Here, therefore, the regular rate to be used to determine overtime in any week,is the rate paid for non-overtime weeks in which an employee works on weekend days. The hourly wage plus the weekend day premium divided by 40 hours. Again citing Federal authority, Huntington pointedout: “[W]here different rates are paid from week to week for the same work and where the difference is justified by no factor other than the number of hours worked by the individual employee [the case here, where Dart's system causes rates to change based on the numberof overtime hours worked]—the longer he works the lower the rate—the deviceis evasive and the rate actually paid in the shorter or nonovertime [period] is his regular rate for overtime purposes in all weeks.” (29 C.F.R. § 778.327(b) (2004), italics added; see Walling v. HardwoodCo., supra, 325 US.at p. 424, 65 31 S.Ct. 1242 [regular raterefers to the hourly rate actually paid the employee for the normal, non-overtime workweek’.) In other words,‘the hourly rate paid for the identical work during [overtime] hours..: cannot be lowerthan the rate paid for non-overtime hours....' (29 C.F.R. § 778.500(b) (2004).) ‘Overtime rates cannot be avoided by manipulating the pay for regular hours or otherwise reducing the pay for regular hours to makeupforthe... overtime rate that will have to be paid.' (Reich v. Midwest Body Corp. (N.D.II1. 1994) 843 F.Supp. 1249, 1251.)" Huntington,supra at 905; 5. THE COURTOF APPEAL'S RELIANCE ON 29 CFR 788.209 (a) CONFLICTS WITH FEDERAL REGULATIONS THAT DIRECTLY APPLY TO DART'S COMPENSATION SCHEME. Given the foregoing, this court should grant review,irrespective of the Court of Appeal's default reliance on 29 CFR 788.209 (a). However, that reliance conflicts with Federal law, and adds a further basis for review. California Courts, in all contexts where applying Federal Law to interpret State law is warranted, should do so properly. There are obviously bonuses for production, different than the so- called "bonuses" herein, tied into the number of hours worked, thatjustify the formula adopted by the Court of Appeal. If, for example, an employee gets a $100 bonus for producing 50 widgets in a week, and she works 49 hours in the week producing those widgets, she was paid straight time in 32 the bonusfor the 9 hours of overtime in the $100 bonus because the bonus was earned by labor producing the 50 widgets over the whole week, including the overtime hours. The overtime owing on that type of bonus, would, therefore, be the $100 bonus divided by 9 hours x 1/2 under both State and Federal Law becausestraight time was already paid for the bonus hours. (See 29 CFR 778.110, and DLSE Manual 49.2.4 and 49,2.4.1). Such a production bonus system fits perfectly into the language of 29 CFR 788.209(a) relied on by the Court of Appeal. However, careful scrutiny of the Federal Regulatory scheme makes clear that 29 CFR 788.209 (a) does not apply to the "bonuses"at issue here. 29 CFR § 778.502, entitled "Artificially labeling part of the regular wages a ‘bonus’ ", makesthis clear. It provides, in relevant part: "(a) The term “bonus” is properly applied to a sum which is paid as an addition to total wages usually because of extra effort of one kind or another, or as a reward for loyal service or as a gift. The term is improperly applied if it is used to designate a portion of regular wages which the employeeis entitled to receive under his regular wage contract." In “this case, the implied in fact employment contract at Dart provided the so-called “bonus” as a portion of regular wages each week an employee worked weekends. Pursuantto the foregoing, such paymentsare not a "bonus" under the Federal Regulations, and therefore, the Court of Appeals reliance on 29 CFR 788.209 (a) in this case is misplaced. 33 29 CFR § 778.502 goes on to provide: "(e) The general rule may’ be Stated that wherever the employee is guaranteed a fixed or determinable sum as his wages each week[here thé case each week with weekend work], no part of this sum is a true bonus andthe rules for determining overtime due on bonusesdo notapply." Here, the foregoing must necessarily inform this court's decision to grant review, given that "each week" that includes a Saturday and/or Sunday, fixed amounts are paid which have nothing to do with the amount of overtime, if any, is worked during the day or week. Further proof of the mistake the Court of Appeal made in relying on the general language in 29 CFR 788.209 (a) is 29 CFR § 778.203, which is entitled "Premium pay for work on Saturdays, Sundays, and other'special days'." It provides in relevantpart: "Under section 7(e)(6) and 7(h) of the Act,[29 USC 207 (e) and (h)] extra compensation provided by a Premium rate ofat least time and one- half which is paid for work on Saturdays, Sundays, holidays, or regular days of rest or on the sixth or seventh day of the workweek(hereinafter referred to as “special days”) may be treated as an overtime premium for the purposes of the Act. If the premium rate is less than time and one- half, the extra compensation provided by such rate mustbe includedin determining the employee's regular rate of pay and cannot be credited 34 toward statutory overtime due, unless it qualifies as an overtime premium undersection 7(e)(5)."" (emphasis added). There is no question that Dart's weekend pay program is a premium for working weekends, thus analysis under 29 CFR § 778.203, is warranted if federal law is pertinentatall. The first question posed by 29 CFR § 778.203 is whether the weekend premium is less than 1.5 the normal rate. Unless employees work very few hours on Saturdays, and/or Sundaysit must be. Dividing a $15 Saturday premium by a regular work day of 8 hours, the premiumwould be $1.87 per hour. If Dart's employees were only paid a minimum wage of $8.00 per hour, and $1.87 was added to it, the Saturday and Sunday premium would be far less than 1.5 x $8.00. Therefore, the Weekend Premium, under 29 CFR § 778.203, "cannot be credited toward statutory overtime due” The Saturday and Sunday premiumsatDart do not qualify as an overtime premium under the 29 USC 207(e)(5) exception because the payments are for weekend work, which per the record herein, is not necessarily tied into hours of "work in excessofeightin a day orn excess of the maximum workweek applicable to such employee under [29 USC] subsection (a), or in excess of the employee’s normal working hours or regular working hours, as the case may be". // H/ 35 CONCLUSION Forthe reasons discussed, review should be granted by this Court. Dated: February 22, 2016 Respectfully Submitted, DENNIS F. MOSS LAYI & EB IAN Ly By: DENNIS F. MOSS Attorneys for Plaintiff, Appellant and Petitioner HECTOR ALVARADO. 36 RULE 14 CERTIFICATE OF COMPLIANCE Counsel of Record hereby certifies that pursuant to Rule 8.204(c)(1) or 8.260(b)(1) of the California Rules of Court, the enclosed brief of Appellant is produced using 13-point Roman typeincluding footnotes and contains approximately 8,306 words, which is less than the total words permitted by the rules of court. Counsel relies on the word countof the computer program usedto preparethis brief. Ds Dennis F. Moss Dated: February 22, 2016 37 CERTIFIED FOR PUBLICATION IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FOURTH APPELLATE DISTRICT DIVISION TWO HECTOR ALVARADO, Plaintiff and Appellant, E061645 v. (Super.Ct.No. RIC1211707) DART CONTAINER CORPORATION OPINION OF CALIFORNIA, Defendant and Respondent. APPEALfrom the Superior Court of Riverside County. Daniel A. Ottolia, Judge. Affirmed. Lavi & Ebrahimian, Joseph Lavi, Jordan D. Bello; and Dennis F. Moss for Plaintiff and Appellant. Best Best & Krieger, Howard Golds and Elizabeth A. Han for Defendant and Respondent. I INTRODUCTION Plaintiff Hector Alvarado (plaintiff) appeals summary judgmententered in favor 1 of defendant Dart Container Corporation of California (defendant). The facts are undisputed. This appeal raises the sole question of law of whether defendant’s formula for calculating overtime on flat sum bonusespaid in the same pay period in which they are earnedis lawful. We conclude it is. There is no California law specifying a method for computing overtime on flat sum bonuses, and defendant’s formula complies with federal law, which provides a formula for calculating bonus overtime. We accordingly affirm summary judgmentin favor of defendant. II FACTS AND PROCEDURAL BACKGROUND The following summary offacts is based ontheparties’ joint statement of undisputed material facts. Defendantis a producer of food service products, including cups andplates. Plaintiff began working for defendant in September 2010, as a warehouseassociate, and was terminated in January 2012. Accordingto defendant’s written policy, an attendance bonus wouldbe paidto any employee who wasscheduled to work a weekendshift and completed the full shift. The bonus was $15 per day, for workinga full shift on Saturday or Sunday,regardless of the number of hours worked beyond the normalscheduled length ofa shift. Defendant calculates the amount ofovertime paid on attendance bonuses during a particular pay period as follows: 1. Multiply the numberofovertime hours worked in a payperiod by the straight hourly rate (straight hourly pay for overtime hours). 2. Add the total amount owedin a pay period for(a) regular non-overtime work, (b) for extra pay suchas attendance bonuses, and (c) overtime due from the first step. That total amountis divided by the total hours worked during the pay period. This amountis the employee’s “regular rate.” 3. Multiply the numberofovertime hours workedin a pay period by the employee’s regular rate, which is determined in step 2. This amount is then dividedin half to obtain the “overtime premium” amount, which is multiplied by the total number of overtime hours worked in the pay period (overtime premium pay). 4. Add the amountfrom step 1 to the amountin step 3 (total overtime pay). This overtime pay is added to the employee’s regular hourly pay and the attendance bonus. During plaintiff's employment, he earned attendance bonuses during weeks he worked overtime and sometimes double time. In August 2012,plaintiff filed a complaint for damages andrestitution, alleging defendant had not properly computed bonus overtime under California law. Plaintiff's complaint as amended (complaint) alleges the following causes of actions: (1) Failure to pay properovertime in violation of Labor Code sections 510 and 1194 bynot including shift differential premiums and bonusesin calculating overtime wages;(2) Failure to provide complete and accurate wage statements, in violation of Labor Code section 226; (3) Failure to timely pay all earned wages dueat separation of employment,in violation of Labor Code sections 201, 202, and 203; (4) Unfair Business Practices, in violation of Business and Professions Code section 17200 et seq.; and (5) civil penalties under the Private Attorneys’ General Act of 2004, Labor Codesection 2698 et seq. (PAGA). Defendantfiled a motion for summary judgmentor, alternatively, for summary adjudication. Defendant argued that defendant’s formula for calculating overtime on plaintiff's attendance bonuses, earned during pay periods in which they were earned, was lawful, and there wasnolegalbasis for plaintiff's proposed alternative formula. Defendantfurther argued federal law applied to calculating overtime on the bonuses because there was no California law providing a formula for calculating overtime on bonuses. Defendantassertedthat plaintiff's proposed formula is based solely on California public policy and void regulations from the Division of Labor Standards Enforcement (DLSE) Manual which haveno force or effect. Defendant concludedthat, since defendant’s overtime formula complies with federal law and does notconflict with state law,it is lawful. Thereforeplaintiff's entire complaint has no merit. Plaintiff filed opposition, arguing there was valid California authority, Marin v. Costco Wholesale Corp. (2008) 169 Cal.App.4th 804 (Marin), applicable in the instant case to calculating overtime on bonuses. Plaintiff further argued that defendant’s formula dilutes and reduces the regular rate of pay by including overtime hours whencalculating the regular rate of pay used to compute overtime on plaintiff's flat sum bonuses. Plaintiff asserted this violates California wage and hourpolicy, in which overtimeis discouraged. Plaintiffalso argued defendant’s formula failed to accountforall required overtimerates and improperly used a multiplier of .5, rather than 1.5, or 2.0, if applicable. Relying on Marin, supra, 169 Cal.App.4th 804,plaintiff argued in his opposition that the formula stated in the DLSE Manualsections 49.2.4.2 and 49.2.4.3 applied. The DLSE Manual formulais as follows: 1. Multiply regular hours by the employee’s hourly rate (regular pay) 2. Multiply overtime hours by the employee’s hourly rate (overtime pay on overtime hours) 3. Divide flat sum bonus by regular hours (overtimerate), and multiply by 1.5 (overtime pay on bonus) 4. Add pay for regular hours, bonus, overtime pay on overtime hours, overtime pay on bonus(total pay). After reviewing the parties’ briefs and listening to oral argument, the trial court granted defendant’s motion for summary judgmenton the following grounds: Thefacts were undisputed; there was no California law applicable to calculating overtime on bonusespaid in the same pay period in which they were earned; Marin is inapplicable; DLSE Manualsections 49.2.4.2 and 49.2.4.3 do not have force of law and are void regulations; in the absenceof controlling California law, federal law directing the method of computing overtime on bonuses must be followed; defendant used this federal formula, which was lawful; and therefore there was no basisforliability on any of plaintiff's causes ofaction. I STANDARD OF REVIEW Plaintiff appeals summary judgmenton the groundthetrial court erred as a matter 5 of law in ruling that defendant’s formula for calculating overtime on flat sum bonusesis lawful. Summary judgmentis properly granted whenthere are notriable issues of material fact and the movingparty is entitled to judgment as a matter of law. (Code Civ. Proc., § 437c. subd, (c); Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476 (Merrill).) Here, wherethe parties agreed to a joint statement of undisputed material facts and there are no disputed facts, we review de novothetrial court’s ruling granting defendant’s motion for summary judgment. (/bid.) IV COMPUTING OVERTIME ON FLAT SUM BONUSES In addressing the issue of whether defendant’s formula for calculating overtime on plaintiffs flatsum bonusesis lawful, we look to federal and state wage and hour law, which in someinstances differs substantially, with California laws tending to be more protective of employees. Where federal and California laws conflict, the law most beneficial to employees applies. (Aguilar v. Associationfor Retarded Citizens (1991) 234 Cal.App.3d 21, 28 (Aguilar).) A. Federal Wage and Hour Law Undersection 207(a)(1) of the federal Fair Labor Standards Act of 1938, as amended (FLSA),! if an employee works over 40 hours in one week, overtime compensation is computed at one and one-half times the employee’s regular rate of pay. Section 207(a)(1) provides that “no employer shall employ any of his employees. . . for a 1 29 United States Code sections 201-219. workweek longer thanforty hours unless such employee receives compensation for his employmentin excess of the hours above specified at a rate not less than one and one- half times the regular rate at which he is employed.” (Italics added.) Asto hourly employees, suchasplaintiff, title 29 of the Code of Federal Regulations (CFR) providesat section 778.1 10(a) that overtime shall be computed as follows: “If the employee is employed solely on the basis of a single hourly rate, the hourly rate is the ‘regular rate.’ For overtime hours of work the employee must be paid, in addition to the straight time hourly earnings, a sum determined by multiplying one-half the hourly rate by the number of hours workedin excess of 40 in the week. Thus a $12 hourly rate will bring, for an employee who works46 hours, a total weekly wage of $588 (46 hours at $12 plus 6 at $6). In other words, the employeeis entitled to be paid an amount equal to $12 an hour for 40 hours and $18 an hourfor the 6 hours of overtime, or a total of $588.” Subdivision (b) of section 778.110 oftitle 29 of the CFR provides the following formula for computing overtime on a “production bonus”(an incentive to increase production): “Ifthe employee receives, in addition to the earnings computed at the $12 hourly rate, a production bonus of $46 for the week, the regular hourly rate of pay is $13 an hour (46 hours at $12 yields $552; the addition ofthe $46 bonus makes total of $598;this total divided by 46 hoursyields a regularrate of $13). The employee is then entitled to be paid a total wage of $637 for 46 hours (46 hours at $13 plus 6 hours at $6.50, or 40 hoursat $13 plus 6 hours at $19.50).” Title 29 of the CFR section 778.110 does not provide a formulafor a flat sum bonus, which is at issue in the instant case. However,title 29 of the CFR section 778.209(a) provides the following formula for bonus overtime in general: “Where a bonus payment is considered a part of the regular rate at which an employee is employed, it must be included in computing his regular hourly rate of pay and overtime compensation. Nodifficulty arises in computing overtime compensation if the bonus covers only one weekly pay period. The amountof the bonus is merely addedto the other earnings of the employee (except statutory exclusions) andthe total divided bytotal : hours worked.” B. CaliforniaWage and Hour Law | Unlikefederal law, California statutory law requires overtime pay for work exceeding a maximum workday, as well as for work exceeding a maximum workweek. “Under California law,plaintiffs are entitled to ‘no less than one and one-half times the regular rate of pay’ for work in excess of eight hours in one workday. (Lab. Code, § 510, subd. (a); see Cal. Code Regs., tit. 8, § 11070, subd. (3)(A)(1)(a) [wage order No. 7- 2001].) In this respect, California law is more protective of workers than the federal ‘fluctuating workweek’ law, which requires one and one-half time overtime compensation only after an employee works more than 40 hours in a workweek.” (Marin, supra 169 Cal.App.4th at pp. 806-807, fn. omitted.) Labor Code section 510 provides that “Eight hours of labor constitutes a day’s work. Any work in excessofeight hours in one workday and any work in excess of 40 hours in any one workweekandthefirst eight hours worked on the seventh day of work 8 in any one workweekshall be compensated at the rate of no less than one and one-half times the regular rate of pay for an employee. Any workin excess of 12 hours in one day shall be compensatedat the rate of no less than twice the regular rate of pay for an employee. Inaddition, any work in excess of eight hours on any seventh day of a workweekshall be compensatedat the rate of no less than twice the regular rate of pay of an employee. Nothing in this section requires an employer to combine more than one rate of overtime compensation in orderto calculate the amount to be paid to an employee for any hourofovertime work.” Supplementing state statutory wage law are state regulations, which include wage and hour orders. “The Industrial Welfare Commission (IWC)‘is the state agency empowered to formulate regulations (known as wage orders) governing employmentin the State of California.’ [Citation.] ... [J] ‘IWC has promulgated 15 [industry and occupation wage] orders—12 orders cover specific industries and 3 orders cover occupations—and1 general minimum wageorder whichappliesto all California employers and employees (excluding public employees and outside salesmen). [Citations.]’ [Citation.]” (Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575, 581 (Morillion); see Skyline Homes, Inc. v. Department ofIndustrial Relations (1985) 165 Cal.App.3d 239, 252 (Skyline); Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, 561-562 (Tidewater).) Wage Order No.1, codified astitle 8 California Code of Regulations section 11010 (CCR), concerns the manufacturing industry and is therefore applicable in the instant case. It provides as to hourly employeesthat “employees shall not be employed 9 more than eight (8) hours in any workday or more than 40 in a workweek unless the employee receives one and onehalf (1 1/2) times such employee’s regular rate of pay for all hours worked over 40 hours in the workweek. Eight (8) hours of labor constitutes a day’s work. Employment beyond eight (8) hours in any workday or more than six (6) days in any workweekis permissible provided the employee is compensated for such overtimeat not less than: [§] (a) One and one-half (1 1/2) times the employee’s regular rate of pay for all hours worked in excess of eight (8) hours up to and including twelve (12) hours in any workday,andfor thefirst eight (8) hours worked on the seventh (7th) consecutive day; of work in a workweek; and [{] (b) Double the employee’s regular rate of pay for all hours worked in excess of 12 hours in any workday andforall hours workedin excess of eight(8) hours on the seventh (7th) consecutive day of work in a workweek.” “The DLSE‘is the state agency empoweredto enforce California’s labor laws, including [WC wageorders.” [Citations.]” (Morillion, supra, 22 Cal.4th at p. 581; see Skyline, supra, 165 Cal.App.3d at p. 252; T;idewater, supra, 14 Cal.4th at pp. 561-562.) “As a general rule, the courts defer to the agency charged with enforcing a regulation wheninterpreting a regulation because the agency possesses expertise in the subjectarea. [Citation.] However, final responsibility for interpreting a statute or regulation rests with the courts and a court will not accept an agency interpretation whichis clearly erroneous or unreasonable. [Citations.]” (Aguilar, supra, 234 Cal.App.3d at p. 28.) 10 C. Analysis — In determining whether defendant’s overtime bonus formula is lawful we begin with the principle that federal law on bonus overtime does not preempt moreprotective California law. “Federal regulations recognize that various state and locallawswill require payment of minimum hourly, daily or weekly wages different from minimumsset forth in the Labor Standards Act, and provide that wherestate or local laws provide greater protection to the employee they shall be taken to override the provisions of the FLSA. (See 29 C.F.R. § 778.5.)” (Skyline, supra, 165 Cal.App.3d at p. 251.) As noted in Skyline, “The specification of a lower maximum workweekor of a minimum workday is rendered meaningless if the state is deprived of the power to enforce the lower maximum. Becausethe requirement of the paymentofan overtimerate is the sole method by which the maximum hourprovisions are madeeffective, it follows that 29 United States Code, section 218(a), necessarily authorizes the state to require the paymentofan overtimerate that recognizes the state’s imposition of a maximum workday and/or a lower maximum workday.” (Jbid.) Our high court in Tidewater explained in the following analytical framework generally applicable to preemption questionsthat federal law does not preemptstate labor law other than in three circumstances: “(1) [W]here the federal law expressly so states, (2) wherethefederal law is so comprehensivethat it leaves ‘“no room”for supplementary state regulation,’ or (3) where the federal and state laws ‘actually conflict[].’ [Citation.]” (Tidewater, supra, 14 Cal.4th at p. 567.) 11 The court in Tidewater decided the issue of whether California IWC wage orders were enforceable against maritime employers understate law. Federal law exempted seamen from federal overtime pay law. The employerfiled an action asking for an injunction curtailing DLSE enforcement of IWC wage orders governingovertimepay. (Tidewater, supra, 14 Cal.4th at p. 563.) The Tidewater court concluded federal law did not preempt California law regulating maritime employment within California. (/d.at p. 564.) In reaching this conclusion, the Tidewater court noted that, “not only does the FLSA leave ‘foom’ for supplementary state regulation of overtime,” the FLSA expressly states that it does not presumptively preemptstate law regulation of overtime. (/d.at p. 567.) The Tidewater court explained that“(t]he FLSA includes a ‘savings clause,’ WHICH PROVIDES:‘Noprovision of this chapter or of any order thereunder shall excuse noncompliance with any .. . State law or municipal ordinanceestablishing ... a maximum workweek lower than the maximum workweekestablished underthis chapter .... (29US.C. § 218(a).) The federal courts that have addressed this question have interpreted this savings clause as expressly permitting states to regulate overtime wages. [Citations.].)”. (Ibid.) The Tidewater court concluded that noneofthe three situationsin which preemption may occur applied. (/d. at p. 568.) Likewise, here, there is no federal law preemption. Noneofthe three situations in which preemption may occur applies here. First, the FLSA doesnot expressly preclude states from regulating overtime applied to bonuses. Furthermore, as explained in Tidewater, supra, 14 Cal.4th 557, the FLSA includes a savings clause which expressly permits states to regulate overtime wages. Second,as indicated by our high court in 12 Tidewater, the federal law is not so comprehensive that it leaves no room for supplementary state regulation of overtime. Third, federal and state laws regarding overtime, as applied to bonuses, do not actually conflict; primarily because there is no express state law providing a formula for calculating bonus overtime. Even though federal law does not preemptstate law here, this does not preclude applying federal law wherethereis no state law regulating bonus overtime. Plaintiff argues there is state law applicable to bonus overtime which is more favorable than federal law. Citing Skyline, supra, 165 Cal.App.3d 239,plaintiff argues federal formulas for calculating overtime cannot be used because they disregard the differences in federal and California law and the federal formulas undermine the legislative intent behind California overtime laws. In Skyline, the employerfiled a declaratory relief action against the DLSE, seeking a ruling that the employer’s method for computing overtime payfor its salaried employees was proper. The employees worked a fluctuating workweek, in which their work hours varied. On some days the employees worked more than eight hours and on other days they did not work or only worked a few hours. Some weeks the employees worked more than 40 hours. The employerpaid its workers a fixed minimumsalary, plus overtime for working over 40 hours a week. The employees argued the employer improperly computed their overtime pay, leading DLSE to institute proceedings against the employer to compel payment. Thetrial court granted DLSE’s motion for summary judgment, and the court in Skyline affirmed. (/d. at p. 255.) 13 The trial court in Skyline rejected the employer’s method ofcalculating overtime by dividing the employee’s weekly salary by the total number of hours actually worked in a given weekto obtain the regular rate of pay, with hours worked over 40 hours in a week compensated as overtime at one-half the regular rate of pay. This method, based on federal law, resulted in lower pay for overtime because the more hours an employee worked overtime, the lower the regular pay rate used to calculate overtime. (Skyline, supra, 165 Cal.App.3d at pp. 245-247.) The Skyline court notedthat, “Unless the insertion of the limitation with respect to the eight-hour day is to be rendered meaningless, we must assumethat the [WC intended to imposea different standard for determining overtime than that allowed under the FLSA.If, as seems obvious, the IWC intended to employ an eight-hour day standard and to discourage the use of longer work days,the fluctuating workweek would noteffectuate this purpose.” (Skyline, supra, 165 Cal.App.3d at p. 248.) The Skyline court concluded California law’s eight-hour day limitation was incompatible with the federal law’s fluctuating workweek methodof calculating the regular pay rate and overtime, which relies solely on the 40-hour workweek, without taking into accountan eight-hour day limitation. (/d. at pp. 248, 254.) “{I]n California overtime wages are also recognized as imposing a premium or penalty on an employerfor using overtime labor, and... this penalty applies to excessive hoursin the workdayas well as in the workweek.” (/d. at p. 249.) Skyline noted that a purpose ofthe California overtime premium requirement“is to discourage long daily hours which the commission has determinedare detrimentalto the 14 welfare of employees, and further, that the overtime is to discourage the use ofdaily schedules in excess of eight hours.” (/d. at p. 254.) The Skyline court therefore rejected the federal law method of calculating overtime and approved the method based on a California wage order regulation, as construed by the DLSE. (Skyline, supra, 165 Cal.App.3d at p. 250.) After the Skyline decision, the formula Skyline adopted for salaried employees wascodified in Labor Code section 515, subdivision (d), which provides: “For the purpose of computing the overtime rate of compensation required to be paid to a nonexemptfull-time salaried employee, the employee’s regular hourly rate shall be 1/40th of the employee’s weekly salary.” (Lab. Code, § 515, subd. (d); Marin, supra, 169 Cal.App.4th at p. 812.) Plaintiffs reliance on Skyline is misplaced because it was confinedto salaried employees working a fluctuating workweek, did not address bonuses, and dealt with an employer whofailed to pay overtime for work exceeding eight hours in a day. (See Marin, supra, 169 Cal.App.4th at pp. 810-811.) In rejecting an equal protection challenge, the Skyline court states: “[T]he method ofcomputing overtime compensation Jor employees other than salaried employees is not before us. Plaintiffs’ pleadings in the trial court specifically stated that ‘The dispute in this case centers on the proper method of overtime computation for employees whoreceivea fixed salary but work a variable numberofhours each week. This case does not concern employees working ona commission,piece rate or other wage basis.’ There has been no showingthat those employeesare similarly situated to salaried employees.” (Skyline, supra, 165 Cal.App.3d 15 at p. 254 (emphasis added); see Marin, at pp. 812-813.) Skyline is not dispositive in the instant case, which concerns computing an hourly employee’s bonus overtime. In Tidewater, the court disapproved Skyline, but only as to Skyline’s holding that DLSE’s written interpretive policies in its manual are not regulations within the meaning of the Administrative Procedure Act (APA).? (Tidewater, supra, 14 Cal.4th at pp. 561, 572-573; Skyline, supra, 165 Cal.App.3d at p. 253.) The court held in Tidewater that DLSE Manual’s written policies interpreting IWC wage orders constitute void regulations because they are legislative in nature and were not adopted in accordance with requisite APA rulemaking procedures. (Tidewater, at pp. 561, 573; Marin, supra, 169 Cal.App.4th at p. 812.) Therefore the trial court cannot rely on DLSE Manual policies and interpretations because they do not have the force of law. (Tidewater,at p. 573; see Marin, at p. 815.) The Tidewater court explained that in the early 1980’s, written DLSE “policy existed only in a draft policy manual the DLSE preparedfor the guidance of deputy labor commissioners. In 1989, however, the DLSE prepared a formal ‘Operations and Procedures Manual’ incorporating the same policy and made that manualavailable to the public on request. The manualreflected ‘an effort to organize .. . interpretive and enforcementpolicies’ of the agency and ‘achieve some measure of uniformity from one office to the next.” The DLSE prepared its policy manuals internally, without input from affected employers, employees, or the public generally.” (Tidewater, supra, 14 Cal.4th at 2 Government Codesection 11340 et seq. 16 p. 563.) There was thus no compliance with the APA, which is required when creating regulations. The court in Tidewater acknowledgedthat, “[o]f course, interpretations that arise in the course of case-specific adjudication are not regulations, though they may be persuasive as precedentsin similar subsequent cases. [Citations.] Similarly, agencies mayprovide private parties with advice letters, which are not subject to the rulemaking provisions of the APA. (Gov. Code, §§ 11343, subd. (a)(3), 11346.1, subd (a).) Thus, if an agencyprepares a policy manualthat is no more than a restatement or summary, without commentary, of the agency’s prior decisionsin specific cases andits prior advice letters, the agency is not adopting regulations. (Cf. Lab. Code, § 1198.4 [implying that some ‘enforcement policy statements or interpretations’ are not subject to the notice provisions of the APA].) A policy manualof this kind would of course be no more binding on the agency in subsequent agency proceedings or on the courts when reviewing agency proceedings than are the decisions and adviceletters that it summarizes.” (Tidewater, supra, 14 Cal.4th at p. 571.) The DLSE Manual provisions were regulations but are unenforceable because they were not adopted in accordance with the APA. (/d.at p. 573.) Likewise, DLSEopinionletters are not controlling upon the courts as binding legal authority. (Brinker Restaurant v. Superior Court (2012) 53 Cal.4th 1004, 1029,fn. 11; Morillion, supra, 22 Cal.4th at p. 584.) The court in Tidewater nevertheless held, based on independentanalysis other than the DLSE Manualprovisions, that the DLSE properly exercised its enforcement jurisdiction andthetrial court erred in enjoining DLSE’s enforcementofIWC wage 17 orders regarding overtime pay. (Tidewater, supra, 14 Cal.4th at p.577.) The Tidewater court reasoned: “The DLSE’s policy may be void, but the underlying wage orders are not void. Courts must enforce those wage orders just as they would if the DLSE had never adoptedits policy.” (/bid.) The Tidewater court accordingly concluded the wage orders applied as authoritative law andtherefore the trial court erred in enjoining overtime applications founded on the wageorders. (/d. at p. 579.) Tidewateris instructive hereas to its holding that the DLSE Manualprovisions are void regulations which are not binding on this court. (Tidewater, supra, 14 Cal.4that p. 576.) Even though DLSE’s interpretations are not entitled to the judicial deference due quasi-legislative rules, such interpretations may beentitled to consideration. (Yamaha Corp. ofAmerica v. State Bd. ofEqualization (1998) 19 Cal.4th 1, 21 (Yamaha).) As explained by our high court in Yamaha, “Whetherjudicial deference to an agency’s interpretationis appropriate and,if so, its extent — the ‘weight’ it should be given — is thus fundamentally situational. A court assessing the value of an interpretation must consider a complex of factors material to the substantive legal issue before it, the particular agency offering the interpretation, and the comparative weightthe factors oughtin reason to command.” There are two broad categories of factors relevant to a court’s assessment of the weight due an agency’s interpretation: “[t]hose ‘indicating that the agency has a comparative interpretive advantage overthe courts,’ and those ‘indicating that the interpretation in question is probably correct.’ [Citations.]” (Jd. at p. 12.) 18 cee Thefirst category includes factors that “‘assume the agency has expertise and technical knowledge, especially where the legal text to be interpreted is technical, obscure, complex, open-ended, or entwined with issues of fact, policy, and discretion. A court is morelikely to defer to an agency’s interpretation of its ownregulation than to its interpretationof a statute, since the agencyis likely to be intimately familiar with regulations it authored and sensitive to the practical implications of one interpretation over another.’ [Citation.]” (Yamaha, supra, 19 Cal.4th at p. 12.) The second group offactors relevant to assessing the weight due an agency’s interpretation “includes indications of careful consideration by senior agencyofficials (‘an interpretation of a statute contained in a regulation adopted after public notice and comment is more deserving of deference than [one] contained in an advice letter prepared by a single staff member’[citation], evidence that the agency ‘has consistently maintained the interpretation in question, especially if [it] is long-standing’ [citation] . . . and indicationsthat the agency’s interpretation was contemporaneouswith legislative enactmentofthe statute being interpreted. If an agency has adoptedan interpretive rule in accordance with Administrative Procedure Actprovisions. . . that circumstance weighsin favorofjudicial deference. However, even formalinterpretive rules do not commandthe same weight as quasi-legislative rules. Because ‘““the ultimate resolution of ... legal questions rests with the courts” [citation], judges play a greater role when reviewing thepersuasive valueof interpretive rules than they do in determining the validity of quasi-legislative rules.” (Yamaha, supra, 19 Cal.4th at pp. 12-13.) 19 Theextent of our reliance on the DLSE Manual for guidanceturns on “‘the thoroughness evident in its consideration, the validity ofits reasoning, its consistency with earlier and later pronouncements, andall thosefactors which give it powerto persuade, iflackingpowerto control.” (Yamaha, supra, 19 Cal.4th at pp. 14-15, quoting Skidmore[v. Swift & Co. (1944) 323 U.S. 134,] 140.) In determining how much weight to give the DLSE Manualas guidancein the instant case, we first consider the DLSE Manual’s statement of sources relied upon in forming the DLSEpolicies and interpretations stated in the DLSE Manual: “This manual summarizesthe policies and interpretations which DLSE has followed in discharging its duty to administer and enforce the labor statutes and regulations of the State of California. The summarized policies and interpretations are derived from the following sources: “1. Decisions of California’s courts which construe the state’s labor statutes and regulations and otherwise apply relevant California law. “2. California statutes and regulations whichare clear and susceptible to only one reasonableinterpretation. “3. Federal court decisions which define or circumscribe the jurisdictional scope of California’s labor laws and regulations or whichareinstructive in interpreting those California laws which incorporate, are modeled on,or parallel federal labor laws and regulations. “4. Selected opinion letters issued by DLSEin responseto requests from private parties which set forth the policies and interpretations of DLSE with respectto the application ofthe state’s labor statutes and regulationsto a specific set offacts. 20 “5. Selected prior decisions rendered by the Labor Commissioneror the Labor Commissioner’s hearing officers in the course of adjudicating disputes arising under California’s labor statutes and regulations.” (DLSE Manual, June 2002, § 1.1.6, pp. 1-2, 1-3.) The DLSE Manualfurtherstates that the particular sources underlying the DLSE Manual’s specific policies and interpretations, such as opinionletters, administrative decisions, and decisions by the labor commissioner adopted as a precedent decision, are indicated in the DLSE Manual. (DLSE Manual, June 2002, §§ 1.1.6.1, 1.1.6.3, p. 1-3.) The DLSE Manualcontains provisions on howto calculate overtime on bonuses. It distinguishes between flat sum bonuses and percentage of productionor other formulaic bonuses. The DLSE Manualsections 49.2.4.2 and 49.2.4.3 of the DLSE Manualaddress overtime on flat sum bonuses. The DLSE Manualsection 49.2.4.2 provides: “Ifthe bonusis a flat sum, such as $300 for continuing to the end of the season, or $5.00 for each day worked, the regular bonusrate is determined by dividing the bonus by the maximum legal regular hours worked during the period to which the bonus applies. This is so because the bonusis not designed to be an incentive for increased production for each hour of work; but, instead is designed to insure that the employee remain in the employ of the employer. To allow this bonusto be calculated by dividing bythe total (instead ofthe straight time hours) would encourage,rather than discourage, the use of overtime. Thus, a premium based on bonusis required for each overtime hourduring the period in order to comply with public policy.” The DLSE Manualsection 49.2.4.3 of the Manual gives an example of how such overtimeona flat sum bonusis calculated. 21 Because the DLSE Manualdoesnotcarry the force of law, this court is not required to mandate compliance with the formula provided in the DLSE Manualsection 49.2.4.2. As explained in Marin, supra, 169 Cal.App.4th at p. 815, “[l]ike the DLSE interpretation at issue in Skyline, Manualsection 49.2.4.2 is ‘a standard of general application interpreting the law the DLSE enforce[s],’ and ‘not merely a restatement of prior agency decisionsor advice letters.’ [Citation.] Our conclusion is supported by section 1.1.6.1 of the Manual, whichstates that if the source of the interpretation is a statute, regulation, court decision, opinionletter, or ‘Administrative Decision’ or ‘Precedent Decision’ of the Labor Commissioner, that source will be identified in the Manual. Nosuch sources are mentioned in section 49.2.4.2. The only source cited for the flat sum bonus rule is ‘public policy.’ Accordingly, section 49.2.4.2 does not have the force of law.” (/bid., fn. omitted.) It not only has no precedential value, it carries very little, if any, persuasive value because the DLSE Manualsection 49.2.4.2 does not cite any supporting legal authority. This lack of any citation to supporting binding California law is because there is none. Thereis nostate law specifying a formula for overtime applied to bonuses, particularly flat sum bonuses. Nevertheless, the court in Marin indicated that the DLSE Manual section 49.2.4.2 provides a reasonable formula for calculating overtime on a flat sum bonus. “The flat sum bonusformula set forth in sections 49.2.4.2 and 49.2.4.3 of the Manual, which uses a divisor ofstraight time, instead oftotal hours workedto set the regular bonusrate, and a multiplier of 1.5, rather than 0.5, to fix the bonus overtime due, produces ‘a premium 22 based on bonus’that the DLSE believes is necessary to avoid encouraging the use of overtime.” (Marin, supra, 169 Cal.App.4th at pp. 817-818.) The Marin court noted that, “(ijn the case ofa true flat sum bonus where the employee cannot earn any additional bonus by working overtime hours, excluding such hours from the divisor prevents them from diluting the regular rate. Including those hours would give the employer an incentive to impose overtime becausethe additional overtime would reduce the cost of overtime by decreasing the regular rate—part of the situation addressed in the Skyline case.” (Marin, supra, 169 Cal.App.4that p. 819.) Although,as indicated by Marin, the DLSE Manualsection 49.2.4.2 provides a reasonable formula for calculating overtime on a flat sum bonus, the formula has not been enacted as enforceable law and therefore this court cannot enforceit. Furthermore, enacting the formula in the DLSE Manualsection 49.2.4.2 as enforceable law falls within the domain of the Legislature and IWC,notthis court. In Marin, the court concluded the DLSE Manualflat sum bonusformula did not apply because the bonus in Marin was a hybrid bonus which functionedprimarily as a production bonus and did not encourage the use of overtime. (Marin, supra, 169 Cal.App.4that p. 818.) Relying on Skyline and the DLSE Manualpolicies,the trial court in Marin held the employer’s overtime formula violated California law, noting that ““{t]he law is sparse regarding how an employeris to calculate overtime when awarding bonuses,” and finding that, ‘given the paucity of California authority in this area and contrary Federal authority, there are substantial groundsfor differences of opinion.’” (Marin, at p. 810.) On appeal, the Marin court reversed the trial court, concluding the 23 employer’s formula did not violate either California or federal law and was lawful. (/d. at p. 806.) | Marin is not dispositive here. Marin concerns a deferred, semi-annual, formulaic bonus which is primarily a production bonus and wasnotpaid in the same pay period earned. The Marin bonus wasbased on the numberofyears worked for the company and numberofpaid hours accrued during a six-month period. In addition, the bonus was paid at the end of a six-month period, with overtime pay added to the bonus. Furthermore,in Marin, unlike in the instant case, there was no directly applicable federal regulation or statute. Here, plaintiff's bonusis a flat sum bonuspaid in the sameperiod earned. Unlike in Marin, federal regulation, CFR section 788.209(a), applies and provides a formula used by defendant for computing overtimeonplaintiffs bonus. Defendant argues that since there is no state law that provides a formula for computing overtime on bonuses, defendant lawfully applied the federal formula. In urging this court to find defendant’s use of the federal formula lawful, defendant explains it had noalternative but to follow the only existing explicit method founded on enforceable law. Bynot regulating overtime pay on bonuses, thestate hasin effect left to federal regulation computing overtime on bonuses. Congresshasspecifically permitted states to enforce overtime laws more generous than the FLSA underthe savings clause (Tidewater, supra, 14 Cal.4th at p. 567; Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th 785, 795 (Ramirez)), yet this state has not enacted anylegislation or regulations specifying a formula for computing overtime paid on bonuses. This court therefore cannot mandate and enforce compliance with plaintiff's proposed formula for computing 24 overtime on bonuses, whenthereis no applicable statute or regulation providing for such a formula. Even thoughthe federal formula for computing bonus overtime may not comport with state policy discouraging overtime, defendant’s use of the federal formula is lawful because it is based on federal law, and there is no state law or regulation providing analternative formula. In the absence of a formula for computing bonus overtime founded on binding state law, there is no law orregulation thetrial court or this court can construe or enforce as a method for computing overtimeplaintiff's bonuses, other than the applicable federal regulation, CFR section 778.209(a). This is not a situation in which state and federal labor laws substantially differ and therefore reliance on federal law is misplaced. (Skyline, supra, 165 Cal.App.3d at pp. 247-249; Ramirez, supra, 20 Cal.4th at p. 798.) Defendanttherefore lawfully used the federal formula for computing overtime on plaintiff's flat sum bonuses. In turn, the trial court properly granted defendant’s motion for summary judgment. 3 During oral argumentplaintiff untimely raised new legal theories not previously briefed byplaintiff and authority not includedin plaintiffs appellate briefs. Plaintiff arguedforthe first time the flat sum bonus wasnotactually a bonusbut rather salary, and the flat sum bonuswasartificially labeled a bonus, constituting a subterfuge that operates to evade overtime pay lawsby reducing the regular hourly rate when overtime hours are worked on the weekend. The legal authority, raised for the first time during oral argument, included Huntington Memorial Hospital v. Superior Court (2005) 131 Cal.App.4th 893; Walling v. Youngerman-Reynolds HardwoodCo. (1945) 325 U.S. 419, 424-425; 29 CFR § 778.203 (premium pay for work on Saturdays, Sundays, and other “special days”); 29 CFR § 778.327(b) (temporary or sporadic reduction in schedule); and 29 CFR § 778.502 (artificially labeling part of the regular wages a “bonus”). Wedonot address in this decision such untimely, waived theories andlegal authority on the groundsplaintiff did not include them in its appellate opening brief or [footnote continued on next page] 25 Vv DISPOSITION The judgmentis affirmed. Defendant is awardedits costs on appeal. CERTIFIED FOR PUBLICATION CODRINGTON J. Weconcur: HOLLENHORST Acting P.J. KING J. reply;plaintiff did not provide defendantor this court with notice beforeoral argument of plaintiffs intent to rely on newlegalauthority and raise new theories; and defendant therefore did not have an opportunity to review andprovidea fully informed response to such new theories andlegal authorities. Furthermore, without suggesting whetherplaintiff's new theories and legal authority have merit, we decline to consider them becauseplaintiff has not demonstrated good cause for raising them forthefirst time during appellate oral argument. (See Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847, 894, fn. 10 [points raised in appellate reply brief forthe first time will not be considered, unless good reason is shown forfailure to present them before]; Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal.App.4th 959, 977, fn. 12; Estate ofMcDaniel (2008) 161 Cal.App.4th 458, 463, quoting People v. Harris (1992) 10 Cal.App.4th 672, 686 [“‘contentionsraised for the first time at oral argumentare disfavored and may be rejected solely on the groundoftheir untimeliness.’”]. 26 PROOF OF SERVICE 1, the undersigned, declare: 1. That declarant is and was, at all times herein mentioned, a citizen of the United States and a resident of the County of Los Angeles, over the age of 18 years, and not a party to or interested party in the within action; that declarant’s business address is 15300 Ventura Boulevard, Suite 207, Sherman Oaks, California 91403. 2. That on February 22, 2016 declarant served the PETITION FOR REVIEW by depositing a true copy thereof in a United States mail box at Sherman Oaks, California in a sealed envelope with postage fully prepaid and addressed to the parties listed on the attached servicelist. 3. That there is regular communication by mail between the place of mailing and the places so addressed. I declare under penalty of perjury that the foregoing is true andcorrect. Executed this 22nd day of February, 2016 at Sherman Oaks,California. / Lea Garbe 38 SERVICE LIST Clerk, California Court of Appeal Attorney for Respondents and Fourth District Court of Appeal Defendants Division 2 Howard B. Golds, Esq. 3389 Twelfth Street Elizabeth A. James, Esq. Riverside, CA 92501 BEST BEST & BRIEGER LLP 2290 University Avenue, 5th Floor Riverside, CA 92502 Attorney General, State of District Attorney, County of California Riverside 1300 "I" Street 2960 OrangeStreet Sacramento, CA 95814-2919 Riverside, CA 92501 39