Alvarado v. Dart Container Corp. of California

(2018) 4 Cal.5th 542

Flat-sum bonuses must be divided by nonovertime hours only — not total hours. This produces a higher regular rate, increasing both overtime premiums and (after Ferra) meal/rest premiums. Most payroll systems default to the wrong method.

Holding

When calculating the regular rate of pay for overtime purposes, a flat-sum bonus must be divided by the number of nonovertime hours worked during the relevant pay period — not total hours. This produces a higher per-hour increment than the total-hours method, increasing the overtime premium owed.

Impact on Defense Practice

Changed the regular rate calculation methodology for every employer paying flat-sum bonuses — attendance bonuses, safety bonuses, production bonuses, and similar non-discretionary payments. Combined with Ferra (premiums at regular rate), Alvarado means that the regular rate for overtime AND for meal/rest premiums must reflect the higher per-hour increment from flat-sum bonuses. The Regular Rate Calculator on this site implements the Alvarado methodology.

Defense Strategy

Audit all flat-sum bonus calculations for the Alvarado methodology. Most payroll systems default to the total-hours method (dividing by all hours worked), which produces an incorrect — and lower — regular rate. The underpayment per overtime hour is the difference between the Alvarado rate and the base rate multiplied by 0.5. Over large workforces and long PAGA periods, this systematic underpayment creates substantial exposure.

This analysis is for informational purposes only. Case law is current as of Q1 2026.