PAGA suit alleges route sales managers did not receive proper overtime rate
A recent lawsuit made under the Private Attorneys General Act of 2004 (PAGA) alleged that the employer improperly calculated the overtime due on a nondiscretionary bonus paid to route sales managers. A California court disagreed with the employee’s claim.
The plaintiff worked for several years for Ecolab, Inc. – the defendant in the case of Lemm v. Ecolab, Inc. – before becoming a route sales manager in April 2018. In this role, he regularly visited Ecolab’s customers to install, to repair, and to maintain its equipment. He also sold Ecolab’s products and parts and offered ongoing training and customer service.
In June 2019, the plaintiff filed a representative PAGA suit. He alleged that Ecolab’s route sales managers did not receive the proper overtime rate as part of the nondiscretionary monthly bonus.
In October 2019, he made additional claims seeking civil penalties associated with Ecolab’s alleged failure to pay all required wages, including reporting time and split shift wages, during the employment.
In their motions for summary adjudication, the parties disagreed on how to calculate the overtime due on the bonus. The plaintiff, citing the formula in section 49.2.4 of the Division of Labor Standards Enforcement Manual, argued that nondiscretionary bonus payments should be incorporated into the regular rate of pay, which would then affect overtime calculations.
As for Ecolab, it cited 29 C.F.R. section 778.210, which allegedly applied to percentage bonuses, which would be paid as a percentage of gross earnings that already incorporated straight-time, overtime, and double-time wages for each bonus period.
The trial court agreed with Ecolab’s position and granted its motion. It said that requiring an employer to pay overtime on a percentage bonus that already included overtime pay would mean that the employer would end up paying “overtime on overtime.” The plaintiff appealed.
The California Court of Appeal for the Second District agreed with the trial court’s decision. Under Ecolab’s application of section 49.2.4, the bonus attributable to the workweek was $416.34, which was the amount of the bonus paid to the plaintiff minus the overtime on the bonus. This calculation complied with both federal and California law, the appellate court said.
As for the plaintiff’s application of section 49.2.4, it failed to consider that the bonus attributable to the workweek already included “overtime on overtime,” the Court of Appeal held. The plaintiff’s calculation went against section 510 of California’s Labor Code and Wage Order No. 5, the appellate court said.
The amount for overtime on bonus that the plaintiff was claiming represented a double counting of “overtime on overtime” since the bonus attributed to that period in the plaintiff’s calculation already included overtime pay, the appellate court explained.
