The regular rate of pay is not the base hourly rate. It is total straight-time compensation divided by total hours worked — and it must include all non-discretionary bonuses, commissions, piece-rate earnings, shift differentials, and other non-hourly compensation. Every overtime hour and every meal/rest premium must be calculated using this higher rate.
Most employers calculate overtime at 1.5x the base hourly rate. This is wrong whenever the employee earns any non-discretionary compensation beyond the base rate. The underpayment per overtime hour equals the difference between the correct regular rate and the base rate, multiplied by the 0.5x premium.
After Ferra v. Loews Hollywood Hotel (2021) 11 Cal.5th 858, meal and rest period premiums must also be calculated at the regular rate — not the base rate. After Alvarado v. Dart Container (2018) 4 Cal.5th 542, flat-sum bonuses must be divided by non-overtime hours only (not total hours) to calculate the per-hour increment.
The true-up problem compounds this: when a commission is earned in one workweek but not calculable until a later pay period, the employer must retroactively recalculate the regular rate for the earning workweek and pay the overtime shortfall. Most payroll systems cannot perform this calculation automatically. The result is a systemic underpayment that repeats every pay period for every commissioned employee — creating substantial PAGA exposure that plaintiff's counsel rarely identifies with precision but that forensic analysis can quantify exactly.