©2023 Seyfarth Shaw LLP www.seyfarth.com 2023 Cal-Peculiarities | 247 In 2018 the Supreme Court in Alvarado reversed.407 Exalting mechanical logic over practical reality, Alvarado endorsed the DLSE’s approach and thus required that the “flat sum” bonus be divided by just straight-time hours (not all hours) and that the resulting regular bonus rate be multiplied by the number of overtime hours and by 1.5, not 0.5. Alvarado rejected an approach that would divide the bonus by all hours worked, because that approach would result in a “progressively decreasing regular rate of pay as the number of overtime hours increases, thus undermining the state’s policy of discouraging overtime work.”408 This strictly logical approach blinks practical reality. Consider a worker earning a $15 bonus during a 50-hour week. By Alvarado’s reasoning, the federal method (dividing $15 by all 50 hours worked—yielding a bonus regular rate of $0.30, multiplied by 0.50 and 10 overtime hours to generate $1.50 in weekly bonus overtime pay) somehow would encourage the employer to create more overtime hours than if the employer used the DLSE method (dividing $15 by just the 40 hours of straight time—yielding a regular bonus rate of $0.375, multiplied by 1.50 and 10 overtime hours to generate $5.625 in weekly bonus overtime pay). Alvarado cited no evidence—in the form of an empirical study or otherwise—to support its speculation about an employer’s incentive to create overtime in this scenario. Nor had the DLSE provided any such evidence when it invented its peculiar “flat sum” bonus rule in the first place. Would an employer really create more overtime— paying time and one-half for each such hour—in order to dilute the bonus regular rate by a few cents? This practical consideration was something Alvarado’s theoretical musing did not begin to contemplate. In a remarkable concurring opinion, four of the seven Supreme Court justices acknowledged that the “spare language” of statutory law could have left employers “somewhat uncertain about how to proceed,” and that the DLSE Manual was not an “authoritative construction by a state agency.” The four concurring justices further acknowledged that employers who “fully intended to comply with state overtime laws” “may now be faced with substantial penalties”—an “unfortunate” state of affairs that “conceivably could have been avoided had an interpretative regulation of this subject been promulgated through formal APA rulemaking.” The concurring justices nonetheless agreed that Alvarado’s new interpretation should apply retroactively, even if, “[r]egrettably,” “more was not done to help employers meet their statutory responsibilities.”409 7.17 Hazard Pay During the Covid-19 pandemic, California grocery, drug store, and other front-line workers sold essential products, stocked shelves, cleaned buildings, and otherwise kept the economy moving. Dozens of California cities and counties took action—often in haphazard ways—to provide these workers with premium pay, commonly called “hazard pay” or “hero pay.” But no politicians asked taxpayers to fund this effort. Rather, local governments imposed a mandate on local businesses to pay workers—sometimes immediately and sometimes even retroactively—hourly wage hikes of $3, $4, or $5. The State of California, meanwhile, took no supervisory role, declining to preempt these local initiatives that confronted larger employers with a patchwork of inconsistent obligations. The California Grocers Association launched legal challenges to the hazard pay ordinances, arguing that they violated the affected employers’ right to equal protection and that they were preempted by the National Labor Relations Act. By March 29, 2021, dozens of local jurisdictions had adopted hazard pay ordinances, requiring additional wages ranging from $3 to $5, effective as of the dates shown (although these ordinances have now expired, as has the California State Covid-19 Supplemental Paid Sick Leave law, which expired on December 31, 2022): Alameda (City) (eff. 5/6/21) ($5) Alhambra (eff. 5/12/21) ($5)
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