California Judge Certifies Office Depot Overtime Pay Class Action Suit

A California federal judge just certified an overtime pay class action suit against Office Depot last week, exposing the Fortune 500 company to perhaps millions of dollars of liability for failing to include bonus pay in its overtime calculations. The suit, Provine et al v. Office Depot Inc., pending in the Northern District of California court, concerns thousands of workers at the company who received incentive bonus pay in the form of $50 “Bravo Cards.” The federal judge has allowed the suit to continue to determine whether Office Depot violated California and federal labor laws in failing to pay overtime on the 5,940 such cards it gave out. This suit follows a similar case pending in the Central District of California court by workers at Bloomingdale’s who similarly alleged their company failed to include their commissions and other bonus pay in their overtime pay calculation. This Office Depot suit as such stands as an example of a growing issue in California labor law today of the proper way to include bonus pay in overtime calculations.
Provine et al v. Office Depot Inc. was filed by a worker at the Antioch Office Depot, just outside San Francisco, who claims the company violated California labor law and the Fair Labor Standards Act in failing to properly calculate his overtime pay. The dispute centered on Office Depot’s bonus incentive “Bravo Awards” program. In the Bravo Awards program, workers were given $50 based on a monthly lottery of eligible workers who had already received recognition for their hard work that month. As overtime pay is calculated based on a “regular rate” of pay that includes non-discretionary bonuses or commissions, Provine claimed that the $50 he was awarded as part of the program was non-discretionary and should have been included in determining his overtime pay. Provine in his suit also filed on behalf of all other workers who had received Bravo Awards that had similarly not been included in their calculation of overtime pay.
This issue of the proper calculation of bonuses in overtime pay is often overlooked, but it can be costly for both workers and employers. Another recent case in California by a worker at Bloomingdale’s, Johnmohammadi v. Bloomingdale’s, alleged a similar set of facts, citing the company’s failure to include bonus pay in determining the “regular rate” of base pay for its overtime calculations. In the Provine case, Office Depot claimed that it did not make a mistake in not including the bonus incentives in its calculation because the “Bravo Awards” bonuses were discretionary. The California federal court rejected this argument, finding that although the bonuses were discretionary in that managers were able to give them to any workers they wished who fulfilled certain criteria, the fixed amount of $50 for such awards made them no longer so.
In finding that the $50 bonus awards were not discretionary because of their fixed amount, the California court drew on its earlier precedents on the issue. This definition of discretionary bonus is not accepted in many other courts in the nation, but is key for any California claims for including incentive pay in overtime calculations. If a bonus or other incentive payment is not discretionary, as in this case, employers must include the amounts of such bonuses in their calculation of the regular rate of pay for overtime. For example, if there is a non-exempt worker who works 60 hours in a week at $20 an hour. and that worker then receives a $50 non-discretionary bonus that week, a company would need to include the $50 into its calculation of the employee’s regular rate of pay in determining overtime. As such, the $50 bonus will bump the employee’s regular rate of pay that week from $20 to $21.25 an hour. The worker will as such be eligible for overtime at one and a half times the calculated regular rate of pay of $21.25, $1.25 more than the set amount before the bonus.
In the case of Provine, the plaintiff worked less than an hour of overtime in the two pay periods he received overtime for. As such, even if Office Depot had erred in calculating his regular rate of pay, he would still be eligible for less than a $1 increase in his salary. Nevertheless, the court found that this amount was sufficient under the California labor laws for him to proceed with his suit. Furthermore, the court found that Provine’s request for class certification was sound, allowing him to file suit on behalf of the thousands of employees who had received the 5,940 Bravo Awards given out since 2007.
This Office Depot case, although concerning only cents per pay period for many of the plaintiffs, when aggregated and with attorneys’ fees and possible penalties considered as well, is sure to be a big headache for the company. This case, as well as the Bloomingdale’s case filed in March, should serve as a wakeup call for any California companies that use similar bonus incentive programs that they may face massive liability from their workers for even just pennies of lost overtime pay.

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