Are You Correctly Calculating Overtime?

May 30, 2018 Written by: Pascal Benyamini

Recently, the California Supreme Court issued its decision in Alvarado v. Dart Container Corporation of California. The Court’s decision changes the manner in which an employer must calculate overtime for employees who earn a flat sum bonus during a single pay period. Accordingly, based on the Court’s decision, this is yet another area where the rules in California differ from the federal rules. This decision is significant because it applies retroactively subject to the applicable statute of limitations.

By way of background, both state and federal laws require that amounts awarded as bonuses be included in determining a non-exempt employee’s overtime rate, except in the case of discretionary bonuses.  This means that when the employee works overtime hours and receives a non-discretionary bonus, this bonus program will increase the non-exempt employee’s hourly rate for calculating overtime.

In Alvarado, the employer provided its employees a flat sum bonus in the form of an attendance bonus for those employees who were scheduled to work on a Saturday or Sunday, and did so, upon completing the full work shift. The primary issue in Alvarado was whether the “the divisor for purposes of calculating the per-hour value of the bonus should be (1) the number of hours the employee actually worked during the pay period, including overtime hours; (2) the number of nonovertime hours the employee worked during the pay period; or (3) the number of nonovertime hours that exist in the pay period, regardless of the number of hours the employee actually worked.”

The employer in Alvarado argued that it properly calculated the overtime rate based on federal regulations, i.e., option 1 — by dividing the employees regular wages plus bonuses by their total hours worked, including overtime hours, during the pay period. The Court concluded, however, that the divisor should be option 2, i.e., the number of nonovertime hours the employee worked during the pay period. As such, the Court ruled that to calculate the regular rate, the employer must divide the employees regular wages plus bonuses by their total regular hours worked, excluding overtime hours, during the pay period.[1]

The Alvarado Court limited its decision to flat sum bonuses comparable to the attendance bonus that the employer was providing its employees and explained that the employer’s weekend attendance bonus was “payable even if the employee work[ed] no overtime at all during the relevant pay period” because it was awarded just for showing up on the weekends.  As such, other types of bonuses such as production bonus, a piecework bonus or a commission are not impacted by this decision. As the Court explained “[o]ther types of nonhourly compensation, such as a production or piecework bonus or a commission, may increase in size in rough proportion to the number of hours worked, including overtime hours, and therefore a different analysis may be warranted.”

In sum, employers who provide a flat sum bonus in California should review their calculations methods and make the necessary adjustments to the regular hourly rate calculation for purposes of calculating the overtime rate. Because the Alvarado decision applies retroactively, these employers should also review their past practices to minimize the risk of any future claims.

[1] The Court focused on the pay period as the basis for calculating regular rate of pay because the manner in which the parties in that case framed the issues. In a modified opinion, the Court explained that “it did not grant review to decide whether, under California law, regular rate of pay is properly calculated on a pay-period basis or a workweek basis, and nothing in this opinion should be interpreted as deciding that question.” See Court’s opinion at fn. 2

Exxon Mobil criticized for worker rights and safety issues at annual shareholder meeting

Tom DiChristopher | @tdichristopher Published 3:38 PM ET Wed, 30 May 2018 Updated 2 Hours Ago

• Exxon Mobil investors voted down four shareholder proposals, including one that would require the oil giant to report on its political lobbying.
• The measure was fueled by concern among union members that Exxon is aligning its safety procedures with a group that drafts industry-friendly legislation.
• In a separate complaint, a shareholder said Exxon’s policy for reducing workplace accidents “penalizes and punishes and disciplines” workers who report incidents and injuries.

Exxon Mobil faced heat over worker rights and safety at its annual meeting on Wednesday but it prevailed against several shareholder demands.

Shareholders voted against four resolutions, including a call for greater clarity around the oil giant’s political lobbying activities. Union members had raised the concern, arguing that Exxon was implementing “complex and confusing” safety procedures aligned with a conservative group known for producing industry-friendly legislation.

At the same meeting, shareholders approved executives’ pay package, with nearly 73 percent of voters supporting the measure. More than 90 percent also voted to re-elect the members of the board.

“Shareholders should be concerned that core health and safety procedures seem to be weakened by our company.” -Ricky Brooks, United Steel Workers Local 13-2001 president

The failure of any single shareholder resolution to attract adequate support this year was a relief to Exxon, which last year failed to quell investors’ demands that the company report regularly on how global climate change initiatives will affect its business. A shareholder resolution calling for the report passed last May after large institutional investors threw their support behind the measure.

The vote came amid reports that Exxon downplayed the danger of global warming despite internal research that showed it was a major concern.

However, a resolution proposed at this year’s meeting by the United Steelworkers union and 25 co-filers asking Exxon to report annually on its lobbying expenses garnered the support of just over a quarter of voting shareholders.

Employees speak out about safety shortfalls

Ricky Brooks, president of USW Local 13-2001 in Baytown, Texas, said Exxon’s membership in the conservative American Legislative Exchange Council, or ALEC, raises safety concerns for its members. He claimed that ALEC, which drafts legislation that states and municipalities can adopt, seeks to water down workers’ rights and health and safety rules, as well as to roll back contracts and arbitration awards.

“We see their impact in how our company is unilaterally implementing complex and confusing safety changes in Baytown,” where Exxon operates a refinery, said Brooks, who works at the facility. “For decades, these safety practices have been mutually agreed upon to ensure workers’ health and safety.”

“Shareholders should be concerned that core health and safety procedures seem to be weakened by our company,” he said.

Brooks said the lobbying report is necessary because publicly available government data is difficult to find and Exxon had failed to hold promised tutorials on the subject.

In response, Exxon CEO Darren Woods, said the Baytown refinery is one of the safest in the company’s circuit and around the world.

However, another shareholder from Baton Rouge, Louisiana, complained that the company’s system for reporting safety issues “penalizes and punishes and disciplines” employees who report incidents or injuries. He said the company’s safety performance record likely does not accurately reflect the true number of workplace accidents because the current policy discourages workers from speaking up.

“Your experience is very different than the philosophy of that system and how we’ve implemented it around the world,” Woods said.

In a statement to CNBC on Thursday, Exxon spokesman William Holbrook said, “Nothing is more important to our company than the safety of our employees, our contractors and the people who live and work around our operations. Safety is a core value for our company and we’re committed to continuous improvement.”

He said Exxon’s safety system “deliberately encourages workers to report [incidents and near-incidents] for the express purpose of learning and preventing reoccurrence.”

Resolutions on independent chair, diversity and shareholder rights also fail

A resolution aimed at preventing Exxon’s CEO from holding the role of chairman of the board once again failed this year after several previous attempts. However, with 38.7 percent of voters in favor of the measure, it garnered the highest support of the four shareholder proposals.

The measure was put forward by the Kestrel Foundation and co-filed by Vermont’s pension fund.

Kenneth Steiner, a prolific filer of shareholder proposals, also put forward a measure that would allow shareholders with a 10-percent stake in the company to call for a special meeting without having to petition a judge. The proposal appeared geared toward giving shareholders greater say over board members.

Just 36 percent of shareholders backed the proposal, down from 40 percent at last year’s meeting.

A representative for New York City Comptroller Scott Stringer and the New York City pension funds presented the final proposal, which asked Exxon to create a “diversity matrix” outlining each director’s race, gender and ethnicity. Exxon, whose board is composed mostly of men and white people, argued that it already provided adequate information.

Shareholders appeared to agree with Exxon. More than 83 percent voted down the measure.

During the Q&A period, Julian Martinez, director of program development at the Hispanic training and education nonprofit SER National, noted that Exxon has no Latinos on its board and urged the company to address the lack of representation.

Boeing’s flight line workers in North Charleston vote for union, giving organized labor a boost in South

By David Wren dwren@postandcourier.com

May 31, 2018 Updated 1 hr ago

Anti-union ads, social media campaigns and a mea culpa from Boeing Co. executive Kevin McAllister weren’t enough to sway flight-line employees at the aerospace giant’s North Charleston campus Thursday, as they voted for union representation in a big win for organized labor in the South.

Of the 169 workers who cast ballots, 104 — or 61.5 percent — voted in favor of having the International Association of Machinists union represent them in collective bargaining.

“They stood up to a Goliath of a company,” said Mike Evans, the IAM’s lead organizer. “They were in a very nasty campaign where they attacked individuals. We stayed on course with education and opportunity and respect and dignity going forward, and here we are today with a win. We’re very excited.”

Boeing. which lost a last-minute request to delay the election, said it will appeal the union’s ability to represent the flight-line group, which it says is too intertwined with the work other manufacturing employees do to parse out for representation.

“Boeing continues to believe that this type of micro-unit is prohibited by federal law,” company spokesman Victor Scott said. “While we are deeply disappointed with the result and are appealing, we will come together as we continue to deliver on our customer commitments.”

While the number is small compared to Boeing’s workforce of 6,749 in the Charleston region, the vote is seen as a major victory for organized labor in South Carolina, which has the nation’s smallest number — 2.6 percent — of workers who belong to a union.

“The South has been a difficult environment for organized labor so for any union to succeed in a campaign, even a small one, is a big victory,” said Susan Schurman, a professor of labor studies and employment relations at Rutgers School of Management and Labor Relations. “We’ll see how this plays out, but my guess is that this is an important step in the history of organized labor in the states.”

Thursday’s vote gives the IAM a foothold at a Boeing site where it failed last year to garner enough support to represent all of the plant’s hourly workers.

It also gives organized labor new life among the Southeast’s fast-growing manufacturing base, where automakers like Nissan and Volkswagen have successfully turned back union challenges in recent years.

Chris Jones, a flight readiness technician inspector who voted in favor of the union, said workers in other parts of the Boeing campus “are very curious about what’s happening with us,” and a labor expert said the win on Thursday could spread.

“Other employees at the site will wait until they see what happens in negotiations before making a decision on union representation,” said Michael Carrouth, a lawyer with the Fisher & Phillips firm in Columbia, which specializes in labor issues.

Boeing fought the IAM’s attempts to unionize workers in filings with the National Labor Relations Board and in advertisements and social media messages on its website, Facebook and Twitter pages.

At the same time, company officials were making overtures to flight-line employees, promising to make things better.

“We’ve been saying for years there are all these problems, but now we’re getting all this attention,” Jones said. “Boeing lawyers are calling us into meetings, (plant manager) David Carbon is coming out to the flight line and actually paying attention to us.”

McAllister, the chief executive of Boeing Commercial Airplanes, visited the North Charleston campus Tuesday for a series of town hall-style meetings with flight-line workers.

“He was saying, ‘It’s all my fault because I didn’t listen,'” Jones said.

Boeing confirmed McAllister’s visit but did not provide details about his discussions with employees.

Flight-line workers contacted the IAM last fall, saying they had concerns about unwarranted and arbitrary changes to work rules, threatened layoffs and mandatory overtime on weekends.

he workers, who are required to have a special license from the Federal Aviation Administration, also said they are paid far less than the national average for their skills and — at an average of $32.70 per hour — make about 30 percent less than their counterparts on the West Coast. Boeing also cut their pay raises from twice a year to once a year after the IAM lost its bid to represent all of the plant’s maintenance and production workers in 2017.

Jones, who has worked at the North Charleston site since it opened in 2011, said flight-line workers also contacted the International Brotherhood of Teamsters and the United Auto Workers unions seeking representation, “but the only one that would help us is the IAM.”

The IAM filed a petition to represent flight line workers on March 5, and the NLRB held a hearing on the matter eight days later when Boeing contested the filing. John Doyle, the NLRB’s regional director, ruled in favor of the union on May 21.

The flight-line employees join about 35,000 other Boeing workers who are represented by the IAM at 24 locations nationwide, mostly on the West Coast.

“Our members work at Boeing plants across the country. We are glad to add the South Carolina plant to the list,” said Bob Martinez, IAM president. “I hope the company will accept the results and join us in a dialogue about the future of American industry and the American worker.”

This was the third time the IAM had attempted to organize Boeing workers in North Charleston. The first, in 2015, ended when the union withdrew its petition days before a scheduled election. Last year, roughly 3,000 workers eligible for representation rejected the IAM by a three-to-one margin.

Organized labor has traditionally struggled in the South, but figures from the Bureau of Labor Statistics show unions experienced a slight uptick in membership last year. There were gains in seven Southern states last year, including South Carolina where union membership grew by about 20,000 workers — to 52,000 total.

The United Auto Workers says about 13 percent of its membership is from the region. And Charleston-area vehicle makers Volvo Cars and Mercedes-Benz Vans — headquartered in European countries where labor unions are common — have said they would not fight organized labor attempts at their plants.

Labor unions also are optimistic that younger workers will boost membership rolls in the South and elsewhere, with the pro-union Economic Policy Institute reporting 75 percent of gains in membership last year came from workers who are under 35 years old.

Young workers appear to be drawn to unions, the EPI said in a recent report, “to address current workforce trends that are increasing work insecurity from the rise of part-time work and unpaid internships to increased numbers of contract workers.”

Boeing’s South Carolina plant is among the largest users of contract labor in the Charleston area. The aerospace firm decided in 2009 to open a manufacturing campus in North Charleston — its first in the South — in part to avoid the union activity that’s common at its West Coast locations.

Boeing builds the 787 Dreamliner plane next to Charleston International Airport. The site is the only place that builds the 787-10, the largest and newest Dreamliner model. It also builds other Dreamliner variants along with a sister plant in Everett, Wash.

Boeing also has North Charleston sites that design and build engine parts, build cabin parts for the Dreamliner and conduct aerospace research.