Shelby Klingerman, Content Curator |

The California Supreme Court ruled unanimously in the case of Alvarado v. Dart Container Corporation of California in March 2018, which changed the way that overtime is calculated in the state of California.

Rick Delaney, a Strategy Manager from Oracle, gave a recent presentation to Quest users that covered the new flat sum bonus calculation compared to production bonus calculation, employee criteria able to earn flat sum bonuses and new tables in PeopleSoft that deal with flat sum bonuses.

Alvarado v. Dart Container Corporation of California

This case ruled that for purposes of calculating an employee’s overtime pay for a period in which the employee earns a “flat sum” bonus, employers must use a “regular bonus rate” of pay. This method is different from the method used for determining the “regular rate of pay,” used when the pay calculation includes a “production” bonus. The bonus is not designed to be an incentive for increased production for each hour of work.

Criteria

To receive flat sum bonuses, employees in PeopleSoft 9.2 must have an FLSA Status of Nonexempt Alternative Overtime, which is called Alternative OT in PeopleSoft 9.1, 9.0 and 8.9 or just Nonexempt in PeopleSoft 8.81. The employee must also be Hourly or Exception Hourly.

Calculations

For a production bonus, the bonus is based on a percentage of production or a formula other than a flat amount. The “regular rate of pay” is found by dividing the total pay (including the bonus) by the total hours worked during the period. Total hours worked includes overtime hours. The calculation for a production bonus is OT Premium=OT hours x (0.5 x Regular rate of pay).

If the bonus is a flat sum, the regular bonus rate is determined by dividing the bonus by the maximum legal regular hours worked during the period. Overtime hours are not included in the calculation. The calculation for flat sum bonuses is Bonus on Overtime=OT hours x Regular bonus rate x Multiplication factor.

PeopleSoft Tables

Two new tables in PeopleSoft deal with flat sum bonuses—the Flat Sum Bonus Table and the Overtime on Flat Sum Bonus Table. The Flat Sum Bonus Table is used to specify which bonus earning codes are eligible for Flat Sum Bonus calculations in a specific state. Once the earning code is defined in this table, it will be excluded from the FLSA calculation for the state.

The Overtime on Flat Sum Bonus Table is used to map Overtime earnings codes to corresponding Overtime on Flat Sum Bonus earnings codes for a specific state. Each Overtime earnings code that requires the calculation of an Overtime on Flat Sum Bonus payment must be mapped on this table to a corresponding, unique Overtime on Flat Sum Bonus earnings code. During pay calculation, the calculation of overtime due on a flat sum bonus payment will generate and insert pay lines using the mapped Overtime on Flat Sum Bonus earnings code.

Learn More

For an example of the calculations, criteria for setting up the earnings codes and how you would calculate flat sum bonuses in special circumstances, check out the full presentation.

Additional Resources

Want more resources like this, all in one place? Discover everything available at COLLABORATE 19, the Technology and Applications Forum for the Oracle Community, April 7-11, 2019, in San Antonio. Learn more and follow #C19TX on Twitter to stay up-to-date on all things COLLABORATE 19!