Regular Rate of Pay Miscalculation

When paying overtime premiums, employers need to calculate a regular rate of pay according to the Fair Labor Standards Act.  Under California law, penalties must be paid at the regular rate as well. In our experience, employers sometimes miscalculate their employees’ regular rate of pay. The calculated regular rate of pay can be lower or higher than the correct regular rate of pay. However, even a modest miscalculation of the regular rate of pay can cause significant statutory penalties.


The accuracy of the regular rate of pay calculation was challenged for a proposed class of employees in California.  As California employees, they were entitled to overtime and double time pay. The plaintiffs alleged that they were underpaid for their overtime and double time hours due to an incorrect calculation of their regular rate of pay.


We reviewed timekeeping data, payroll data, and the employer’s formula for the regular rate of pay, overtime and double time pay.  We confirmed that there were miscalculations in the regular rate of pay in many pay periods for many employees. However, the vast majority of miscalculations of regular rate of pay led to slight overpayments of overtime and/or double time pay.  The defendant included payments that were not required to be part of the regular rate of pay. The defendant was also paying overtime at a much higher rate than required. We reported such findings to the employer and the employer corrected their formula.

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Welch Consulting Practice Areas

Expert Services in Economics and Statistics.