INTRODUCTION

Plaintiff Hector Alvarado (plaintiff) appeals summary judgment entered in favor

of defendant Dart Container Corporation of California (defendant). The facts are

undisputed. This appeal raises the sole question of law of whether defendant’s formula

for calculating overtime on flat sum bonuses paid in the same pay period in which they

are earned is lawful. We conclude it is. There is no California law specifying a method

for computing overtime on flat sum bonuses, and defendant’s formula complies with

federal law, which provides a formula for calculating bonus overtime. We accordingly

affirm summary judgment in favor of defendant.

II

FACTS AND PROCEDURAL BACKGROUND

The following summary of facts is based on the parties’ joint statement of

undisputed material facts. Defendant is a producer of food service products, including

cups and plates. Plaintiff began working for defendant in September 2010, as a

warehouse associate, and was terminated in January 2012.

According to defendant’s written policy, an attendance bonus would be paid to

any employee who was scheduled to work a weekend shift and completed the full shift.

The bonus was $15 per day, for working a full shift on Saturday or Sunday, regardless of

the number of hours worked beyond the normal scheduled length of a shift.

Defendant calculates the amount of overtime paid on attendance bonuses during a

particular pay period as follows:

2 1. Multiply the number of overtime hours worked in a pay period by the straight

hourly rate (straight hourly pay for overtime hours).

2. Add the total amount owed in a pay period for (a) regular non-overtime work, (b)

for extra pay such as attendance bonuses, and (c) overtime due from the first step.

That total amount is divided by the total hours worked during the pay period. This

amount is the employee’s “regular rate.”

3. Multiply the number of overtime hours worked in a pay period by the employee’s

regular rate, which is determined in step 2. This amount is then divided in half to

obtain the “overtime premium” amount, which is multiplied by the total number of

overtime hours worked in the pay period (overtime premium pay).

4. Add the amount from step 1 to the amount in step 3 (total overtime pay). This

overtime pay is added to the employee’s regular hourly pay and the attendance

bonus.

During plaintiff’s employment, he earned attendance bonuses during weeks he

worked overtime and sometimes double time.

In August 2012, plaintiff filed a complaint for damages and restitution, alleging

defendant had not properly computed bonus overtime under California law. Plaintiff’s

complaint as amended (complaint) alleges the following causes of actions: (1) Failure to

pay proper overtime in violation of Labor Code sections 510 and 1194 by not including

shift differential premiums and bonuses in calculating overtime wages; (2) Failure to

provide complete and accurate wage statements, in violation of Labor Code section 226;

(3) Failure to timely pay all earned wages due at separation of employment, in violation

3 of Labor Code sections 201, 202, and 203; (4) Unfair Business Practices, in violation of

Business and Professions Code section 17200 et seq.; and (5) civil penalties under the

Private Attorneys’ General Act of 2004, Labor Code section 2698 et seq. (PAGA).

Defendant filed a motion for summary judgment or, alternatively, for summary

adjudication. Defendant argued that defendant’s formula for calculating overtime on

plaintiff’s attendance bonuses, earned during pay periods in which they were earned, was

lawful, and there was no legal basis for plaintiff’s proposed alternative formula.

Defendant further argued federal law applied to calculating overtime on the bonuses

because there was no California law providing a formula for calculating overtime on

bonuses. Defendant asserted that plaintiff’s proposed formula is based solely on

California public policy and void regulations from the Division of Labor Standards

Enforcement (DLSE) Manual which have no force or effect. Defendant concluded that,

since defendant’s overtime formula complies with federal law and does not conflict with

state law, it is lawful. Therefore plaintiff’s entire complaint has no merit.

Plaintiff filed opposition, arguing there was valid California authority, Marin v.

Costco Wholesale Corp. (2008) 169 Cal.App.4th 804 (Marin), applicable in the instant

case to calculating overtime on bonuses. Plaintiff further argued that defendant’s formula

dilutes and reduces the regular rate of pay by including overtime hours when calculating

the regular rate of pay used to compute overtime on plaintiff’s flat sum bonuses. Plaintiff

asserted this violates California wage and hour policy, in which overtime is discouraged.

Plaintiff also argued defendant’s formula failed to account for all required overtime rates

and improperly used a multiplier of .5, rather than 1.5, or 2.0, if applicable.

4 Relying on Marin, supra, 169 Cal.App.4th 804, plaintiff argued in his opposition

that the formula stated in the DLSE Manual sections 49.2.4.2 and 49.2.4.3 applied. The

DLSE Manual formula is as follows:

1. Multiply regular hours by the employee’s hourly rate (regular pay)

2. Multiply overtime hours by the employee’s hourly rate (overtime pay on

overtime hours)

3. Divide flat sum bonus by regular hours (overtime rate), and multiply by 1.5

(overtime pay on bonus)

4. Add pay for regular hours, bonus, overtime pay on overtime hours, overtime

pay on bonus (total pay).

After reviewing the parties’ briefs and listening to oral argument, the trial court

granted defendant’s motion for summary judgment on the following grounds: The facts

were undisputed; there was no California law applicable to calculating overtime on

bonuses paid in the same pay period in which they were earned; Marin is inapplicable;

DLSE Manual sections 49.2.4.2 and 49.2.4.3 do not have force of law and are void

regulations; in the absence of controlling California law, federal law directing the method

of computing overtime on bonuses must be followed; defendant used this federal

formula, which was lawful; and therefore there was no basis for liability on any of

plaintiff’s causes of action.

III

STANDARD OF REVIEW

Plaintiff appeals summary judgment on the ground the trial court erred as a matter

5 of law in ruling that defendant’s formula for calculating overtime on flat sum bonuses is

lawful. Summary judgment is properly granted when there are no triable issues of

material fact and the moving party is entitled to judgment as a matter of law. (Code Civ.

Proc., § 437c, subd. (c); Merrill v. Navegar, Inc. (2001) 26 Cal.4th 465, 476 (Merrill).)

Here, where the parties agreed to a joint statement of undisputed material facts and there

are no disputed facts, we review de novo the trial court’s ruling granting defendant’s

motion for summary judgment. (Ibid.)

IV

COMPUTING OVERTIME ON FLAT SUM BONUSES

In addressing the issue of whether defendant’s formula for calculating overtime on

plaintiff’s flat sum bonuses is lawful, we look to federal and state wage and hour law,

which in some instances differs substantially, with California laws tending to be more

protective of employees. Where federal and California laws conflict, the law most

beneficial to employees applies. (Aguilar v. Association for Retarded Citizens (1991)

234 Cal.App.3d 21, 28 (Aguilar).)

A. Federal Wage and Hour Law

Under section 207(a)(1) of the federal Fair Labor Standards Act of 1938, as

amended (FLSA),1 if an employee works over 40 hours in one week, overtime

compensation is computed at one and one-half times the employee’s regular rate of pay.

Section 207(a)(1) provides that “no employer shall employ any of his employees . . . for a

1 29 United States Code sections 201-219.

6 workweek longer than forty hours unless such employee receives compensation for his

employment in excess of the hours above specified at a rate not less than one and one-

half times the regular rate at which he is employed.” (Italics added.)

As to hourly employees, such as plaintiff, title 29 of the Code of Federal

Regulations (CFR) provides at section 778.110(a) that overtime shall be computed as

follows: “If the employee is employed solely on the basis of a single hourly rate, the

hourly rate is the ‘regular rate.’ For overtime hours of work the employee must be paid,

in addition to the straight time hourly earnings, a sum determined by multiplying one-half

the hourly rate by the number of hours worked in excess of 40 in the week. Thus a $12

hourly rate will bring, for an employee who works 46 hours, a total weekly wage of $588

(46 hours at $12 plus 6 at $6). In other words, the employee is entitled to be paid an

amount equal to $12 an hour for 40 hours and $18 an hour for the 6 hours of overtime, or

a total of $588.”

Subdivision (b) of section 778.110 of title 29 of the CFR provides the following

formula for computing overtime on a “production bonus” (an incentive to increase

production): “If the employee receives, in addition to the earnings computed at the $12

hourly rate, a production bonus of $46 for the week, the regular hourly rate of pay is $13

an hour (46 hours at $12 yields $552; the addition of the $46 bonus makes a total of

$598; this total divided by 46 hours yields a regular rate of $13). The employee is then

entitled to be paid a total wage of $637 for 46 hours (46 hours at $13 plus 6 hours at

$6.50, or 40 hours at $13 plus 6 hours at $19.50).”

7 Title 29 of the CFR section 778.110 does not provide a formula for a flat sum

bonus, which is at issue in the instant case. However, title 29 of the CFR section

778.209(a) provides the following formula for bonus overtime in general: “Where a

bonus payment is considered a part of the regular rate at which an employee is employed,

it must be included in computing his regular hourly rate of pay and overtime

compensation. No difficulty arises in computing overtime compensation if the bonus

covers only one weekly pay period. The amount of the bonus is merely added to the

other earnings of the employee (except statutory exclusions) and the total divided by total

hours worked.”

B. California Wage and Hour Law

Unlike federal law, California statutory law requires overtime pay for work

exceeding a maximum workday, as well as for work exceeding a maximum workweek.

“Under California law, plaintiffs are entitled to ‘no less than one and one-half times the

regular rate of pay’ for work in excess of eight hours in one workday. (Lab. Code, § 510,

subd. (a); see Cal. Code Regs., tit. 8, § 11070, subd. (3)(A)(1)(a) [wage order No. 7-

2001].) In this respect, California law is more protective of workers than the federal

‘fluctuating workweek’ law, which requires one and one-half time overtime

compensation only after an employee works more than 40 hours in a workweek.”

(Marin, supra, 169 Cal.App.4th at pp. 806-807, fn. omitted.)

Labor Code section 510 provides that “Eight hours of labor constitutes a day’s

work. Any work in excess of eight hours in one workday and any work in excess of 40

hours in any one workweek and the first eight hours worked on the seventh day of work

8 in any one workweek shall be compensated at the rate of no less than one and one-half

times the regular rate of pay for an employee. Any work in excess of 12 hours in one day

shall be compensated at the rate of no less than twice the regular rate of pay for an

employee. In addition, any work in excess of eight hours on any seventh day of a

workweek shall be compensated at the rate of no less than twice the regular rate of pay of

an employee. Nothing in this section requires an employer to combine more than one

rate of overtime compensation in order to calculate the amount to be paid to an employee

for any hour of overtime work.”

Supplementing state statutory wage law are state regulations, which include wage

and hour orders. “The Industrial Welfare Commission (IWC) ‘is the state agency

empowered to formulate regulations (known as wage orders) governing employment in

the State of California.’ [Citation.] . . . [¶] ‘IWC has promulgated 15 [industry and

occupation wage] orders—12 orders cover specific industries and 3 orders cover

occupations—and 1 general minimum wage order which applies to all California

employers and employees (excluding public employees and outside salesmen).

[Citations.]’ [Citation.]” (Morillion v. Royal Packing Co. (2000) 22 Cal.4th 575, 581

(Morillion); see Skyline Homes, Inc. v. Department of Industrial Relations (1985) 165

Cal.App.3d 239, 252 (Skyline); Tidewater Marine Western, Inc. v. Bradshaw (1996) 14

Cal.4th 557, 561-562 (Tidewater).)

Wage Order No. 1, codified as title 8 California Code of Regulations section

11010 (CCR), concerns the manufacturing industry and is therefore applicable in the

instant case. It provides as to hourly employees that “employees shall not be employed

9 more than eight (8) hours in any workday or more than 40 in a workweek unless the

employee receives one and one half (1 1/2) times such employee’s regular rate of pay for

all hours worked over 40 hours in the workweek. Eight (8) hours of labor constitutes a

day’s work. Employment beyond eight (8) hours in any workday or more than six (6)

days in any workweek is permissible provided the employee is compensated for such

overtime at not less than: [¶] (a) One and one-half (1 1/2) times the employee’s regular

rate of pay for all hours worked in excess of eight (8) hours up to and including twelve

(12) hours in any workday, and for the first eight (8) hours worked on the seventh (7th)

consecutive day; of work in a workweek; and [¶] (b) Double the employee’s regular rate

of pay for all hours worked in excess of 12 hours in any workday and for all hours

worked in excess of eight (8) hours on the seventh (7th) consecutive day of work in a

workweek.”

“The DLSE ‘is the state agency empowered to enforce California’s labor laws,

including IWC wage orders.’ [Citations.]” (Morillion, supra, 22 Cal.4th at p. 581; see

Skyline, supra, 165 Cal.App.3d at p. 252; Tidewater, supra, 14 Cal.4th at pp. 561-562.)

“As a general rule, the courts defer to the agency charged with enforcing a regulation

when interpreting a regulation because the agency possesses expertise in the subject area.

[Citation.] However, final responsibility for interpreting a statute or regulation rests with

the courts and a court will not accept an agency interpretation which is clearly erroneous

or unreasonable. [Citations.]” (Aguilar, supra, 234 Cal.App.3d at p. 28.)

10 C. Analysis

In determining whether defendant’s overtime bonus formula is lawful we begin

with the principle that federal law on bonus overtime does not preempt more protective

California law. “Federal regulations recognize that various state and local laws will

require payment of minimum hourly, daily or weekly wages different from minimums set

forth in the Labor Standards Act, and provide that where state or local laws provide

greater protection to the employee they shall be taken to override the provisions of the

FLSA. (See 29 C.F.R. § 778.5.)” (Skyline, supra, 165 Cal.App.3d at p. 251.) As noted

in Skyline, “The specification of a lower maximum workweek or of a minimum workday

is rendered meaningless if the state is deprived of the power to enforce the lower

maximum. Because the requirement of the payment of an overtime rate is the sole

method by which the maximum hour provisions are made effective, it follows that 29

United States Code, section 218(a), necessarily authorizes the state to require the

payment of an overtime rate that recognizes the state’s imposition of a maximum

workday and/or a lower maximum workday.” (Ibid.)

Our high court in Tidewater explained in the following analytical framework

generally applicable to preemption questions that federal law does not preempt state labor

law other than in three circumstances: “(1) [W]here the federal law expressly so states,

(2) where the federal law is so comprehensive that it leaves ‘“no room” for

supplementary state regulation,’ or (3) where the federal and state laws ‘actually

conflict[].’ [Citation.]” (Tidewater, supra, 14 Cal.4th at p. 567.)

11 The court in Tidewater decided the issue of whether California IWC wage orders

were enforceable against maritime employers under state law. Federal law exempted

seamen from federal overtime pay law. The employer filed an action asking for an

injunction curtailing DLSE enforcement of IWC wage orders governing overtime pay.

(Tidewater, supra, 14 Cal.4th at p. 563.) The Tidewater court concluded federal law did

not preempt California law regulating maritime employment within California. (Id. at p.

564.) In reaching this conclusion, the Tidewater court noted that, “not only does the

FLSA leave ‘room’ for supplementary state regulation of overtime,” the FLSA expressly

states that it does not presumptively preempt state law regulation of overtime. (Id. at p.

567.) The Tidewater court explained that “[t]he FLSA includes a ‘savings clause,’

WHICH PROVIDES: ‘No provision of this chapter or of any order thereunder shall

excuse noncompliance with any . . . State law or municipal ordinance establishing . . . a

maximum workweek lower than the maximum workweek established under this chapter

. . . .’ (29 U.S.C. § 218(a).) The federal courts that have addressed this question have

interpreted this savings clause as expressly permitting states to regulate overtime wages.

[Citations.].)” (Ibid.) The Tidewater court concluded that none of the three situations in

which preemption may occur applied. (Id. at p. 568.)

Likewise, here, there is no federal law preemption. None of the three situations in

which preemption may occur applies here. First, the FLSA does not expressly preclude

states from regulating overtime applied to bonuses. Furthermore, as explained in

Tidewater, supra, 14 Cal.4th 557, the FLSA includes a savings clause which expressly

permits states to regulate overtime wages. Second, as indicated by our high court in

12 Tidewater, the federal law is not so comprehensive that it leaves no room for

supplementary state regulation of overtime. Third, federal and state laws regarding

overtime, as applied to bonuses, do not actually conflict; primarily because there is no

express state law providing a formula for calculating bonus overtime. Even though

federal law does not preempt state law here, this does not preclude applying federal law

where there is no state law regulating bonus overtime.

Plaintiff argues there is state law applicable to bonus overtime which is more

favorable than federal law. Citing Skyline, supra, 165 Cal.App.3d 239, plaintiff argues

federal formulas for calculating overtime cannot be used because they disregard the

differences in federal and California law and the federal formulas undermine the

legislative intent behind California overtime laws. In Skyline, the employer filed a

declaratory relief action against the DLSE, seeking a ruling that the employer’s method

for computing overtime pay for its salaried employees was proper. The employees

worked a fluctuating workweek, in which their work hours varied. On some days the

employees worked more than eight hours and on other days they did not work or only

worked a few hours. Some weeks the employees worked more than 40 hours. The

employer paid its workers a fixed minimum salary, plus overtime for working over 40

hours a week. The employees argued the employer improperly computed their overtime

pay, leading DLSE to institute proceedings against the employer to compel payment.

The trial court granted DLSE’s motion for summary judgment, and the court in Skyline

affirmed. (Id. at p. 255.)

13 The trial court in Skyline rejected the employer’s method of calculating overtime

by dividing the employee’s weekly salary by the total number of hours actually worked in

a given week to obtain the regular rate of pay, with hours worked over 40 hours in a week

compensated as overtime at one-half the regular rate of pay. This method, based on

federal law, resulted in lower pay for overtime because the more hours an employee

worked overtime, the lower the regular pay rate used to calculate overtime. (Skyline,

supra, 165 Cal.App.3d at pp. 245-247.)

The Skyline court noted that, “Unless the insertion of the limitation with respect to

the eight-hour day is to be rendered meaningless, we must assume that the IWC intended

to impose a different standard for determining overtime than that allowed under the

FLSA. If, as seems obvious, the IWC intended to employ an eight-hour day standard and

to discourage the use of longer work days, the fluctuating workweek would not effectuate

this purpose.” (Skyline, supra, 165 Cal.App.3d at p. 248.) The Skyline court concluded

California law’s eight-hour day limitation was incompatible with the federal law’s

fluctuating workweek method of calculating the regular pay rate and overtime, which

relies solely on the 40-hour workweek, without taking into account an eight-hour day

limitation. (Id. at pp. 248, 254.) “[I]n California overtime wages are also recognized as

imposing a premium or penalty on an employer for using overtime labor, and . . . this

penalty applies to excessive hours in the workday as well as in the workweek.” (Id. at p.

249.) Skyline noted that a purpose of the California overtime premium requirement “is to

discourage long daily hours which the commission has determined are detrimental to the

14 welfare of employees, and further, that the overtime is to discourage the use of daily

schedules in excess of eight hours.” (Id. at p. 254.)

The Skyline court therefore rejected the federal law method of calculating

overtime and approved the method based on a California wage order regulation, as

construed by the DLSE. (Skyline, supra, 165 Cal.App.3d at p. 250.) After the Skyline

decision, the formula Skyline adopted for salaried employees was codified in Labor Code

section 515, subdivision (d), which provides: “For the purpose of computing the

overtime rate of compensation required to be paid to a nonexempt full-time salaried

employee, the employee’s regular hourly rate shall be 1/40th of the employee’s weekly

salary.” (Lab. Code, § 515, subd. (d); Marin, supra, 169 Cal.App.4th at p. 812.)

Plaintiff’s reliance on Skyline is misplaced because it was confined to salaried

employees working a fluctuating workweek, did not address bonuses, and dealt with an

employer who failed to pay overtime for work exceeding eight hours in a day. (See

Marin, supra, 169 Cal.App.4th at pp. 810-811.) In rejecting an equal protection

challenge, the Skyline court states: “[T]he method of computing overtime compensation

for employees other than salaried employees is not before us. Plaintiffs’ pleadings in the

trial court specifically stated that ‘The dispute in this case centers on the proper method

of overtime computation for employees who receive a fixed salary but work a variable

number of hours each week. This case does not concern employees working on a

commission, piece rate or other wage basis.’ There has been no showing that those

employees are similarly situated to salaried employees.” (Skyline, supra, 165 Cal.App.3d

15 at p. 254 (emphasis added); see Marin, at pp. 812-813.) Skyline is not dispositive in the

instant case, which concerns computing an hourly employee’s bonus overtime.

In Tidewater, the court disapproved Skyline, but only as to Skyline’s holding that

DLSE’s written interpretive policies in its manual are not regulations within the meaning

of the Administrative Procedure Act (APA).2 (Tidewater, supra, 14 Cal.4th at pp. 561,

572-573; Skyline, supra, 165 Cal.App.3d at p. 253.) The court held in Tidewater that

DLSE Manual’s written policies interpreting IWC wage orders constitute void

regulations because they are legislative in nature and were not adopted in accordance

with requisite APA rulemaking procedures. (Tidewater, at pp. 561, 573; Marin, supra,

169 Cal.App.4th at p. 812.) Therefore the trial court cannot rely on DLSE Manual

policies and interpretations because they do not have the force of law. (Tidewater, at p.

573; see Marin, at p. 815.)

The Tidewater court explained that in the early 1980’s, written DLSE “policy

existed only in a draft policy manual the DLSE prepared for the guidance of deputy labor

commissioners. In 1989, however, the DLSE prepared a formal ‘Operations and

Procedures Manual’ incorporating the same policy and made that manual available to the

public on request. The manual reflected ‘an effort to organize . . . interpretive and

enforcement policies’ of the agency and ‘achieve some measure of uniformity from one

office to the next.’ The DLSE prepared its policy manuals internally, without input from

affected employers, employees, or the public generally.” (Tidewater, supra, 14 Cal.4th at

2 Government Code section 11340 et seq.

16 p. 563.) There was thus no compliance with the APA, which is required when creating

regulations.

The court in Tidewater acknowledged that, “[o]f course, interpretations that arise

in the course of case-specific adjudication are not regulations, though they may be

persuasive as precedents in similar subsequent cases. [Citations.] Similarly, agencies

may provide private parties with advice letters, which are not subject to the rulemaking

provisions of the APA. (Gov. Code, §§ 11343, subd. (a)(3), 11346.1, subd (a).) Thus, if

an agency prepares a policy manual that is no more than a restatement or summary,

without commentary, of the agency’s prior decisions in specific cases and its prior advice

letters, the agency is not adopting regulations. (Cf. Lab. Code, § 1198.4 [implying that

some ‘enforcement policy statements or interpretations’ are not subject to the notice

provisions of the APA].) A policy manual of this kind would of course be no more

binding on the agency in subsequent agency proceedings or on the courts when reviewing

agency proceedings than are the decisions and advice letters that it summarizes.”

(Tidewater, supra, 14 Cal.4th at p. 571.) The DLSE Manual provisions were regulations

but are unenforceable because they were not adopted in accordance with the APA. (Id. at

p. 573.) Likewise, DLSE opinion letters are not controlling upon the courts as binding

legal authority. (Brinker Restaurant v. Superior Court (2012) 53 Cal.4th 1004, 1029, fn.

11; Morillion, supra, 22 Cal.4th at p. 584.)

The court in Tidewater nevertheless held, based on independent analysis other

than the DLSE Manual provisions, that the DLSE properly exercised its enforcement

jurisdiction and the trial court erred in enjoining DLSE’s enforcement of IWC wage

17 orders regarding overtime pay. (Tidewater, supra, 14 Cal.4th at p. 577.) The Tidewater

court reasoned: “The DLSE’s policy may be void, but the underlying wage orders are not

void. Courts must enforce those wage orders just as they would if the DLSE had never

adopted its policy.” (Ibid.) The Tidewater court accordingly concluded the wage orders

applied as authoritative law and therefore the trial court erred in enjoining overtime

applications founded on the wage orders. (Id. at p. 579.)

Tidewater is instructive here as to its holding that the DLSE Manual provisions are

void regulations which are not binding on this court. (Tidewater, supra, 14 Cal.4th at p.

576.) Even though DLSE’s interpretations are not entitled to the judicial deference due

quasi-legislative rules, such interpretations may be entitled to consideration. (Yamaha

Corp. of America v. State Bd. of Equalization (1998) 19 Cal.4th 1, 21 (Yamaha).) As

explained by our high court in Yamaha, “Whether judicial deference to an agency’s

interpretation is appropriate and, if so, its extent — the ‘weight’ it should be given — is

thus fundamentally situational. A court assessing the value of an interpretation must

consider a complex of factors material to the substantive legal issue before it, the

particular agency offering the interpretation, and the comparative weight the factors

ought in reason to command.” There are two broad categories of factors relevant to a

court’s assessment of the weight due an agency’s interpretation: “[t]hose ‘indicating that

the agency has a comparative interpretive advantage over the courts,’ and those

‘indicating that the interpretation in question is probably correct.’ [Citations.]” (Id. at p.

12.)

18 The first category includes factors that “‘assume the agency has expertise and

technical knowledge, especially where the legal text to be interpreted is technical,

obscure, complex, open-ended, or entwined with issues of fact, policy, and discretion. A

court is more likely to defer to an agency’s interpretation of its own regulation than to its

interpretation of a statute, since the agency is likely to be intimately familiar with

regulations it authored and sensitive to the practical implications of one interpretation

over another.’ [Citation.]” (Yamaha, supra, 19 Cal.4th at p. 12.)

The second group of factors relevant to assessing the weight due an agency’s

interpretation “includes indications of careful consideration by senior agency officials

(‘an interpretation of a statute contained in a regulation adopted after public notice and

comment is more deserving of deference than [one] contained in an advice letter prepared

by a single staff member’ [citation], evidence that the agency ‘has consistently

maintained the interpretation in question, especially if [it] is long-standing’ [citation] . . .

and indications that the agency’s interpretation was contemporaneous with legislative

enactment of the statute being interpreted. If an agency has adopted an interpretive rule

in accordance with Administrative Procedure Act provisions . . . that circumstance

weighs in favor of judicial deference. However, even formal interpretive rules do not

command the same weight as quasi-legislative rules. Because ‘“the ultimate resolution of

. . . legal questions rests with the courts”’ [citation], judges play a greater role when

reviewing the persuasive value of interpretive rules than they do in determining the

validity of quasi-legislative rules.” (Yamaha, supra, 19 Cal.4th at pp. 12-13.)

19 The extent of our reliance on the DLSE Manual for guidance turns on “‘the

thoroughness evident in its consideration, the validity of its reasoning, its consistency

with earlier and later pronouncements, and all those factors which give it power to

persuade, if lacking power to control.’” (Yamaha, supra, 19 Cal.4th at pp. 14-15,

quoting Skidmore [v. Swift & Co. (1944) 323 U.S. 134,] 140.) In determining how much

weight to give the DLSE Manual as guidance in the instant case, we first consider the

DLSE Manual’s statement of sources relied upon in forming the DLSE policies and

interpretations stated in the DLSE Manual: “This manual summarizes the policies and

interpretations which DLSE has followed in discharging its duty to administer and

enforce the labor statutes and regulations of the State of California. The summarized

policies and interpretations are derived from the following sources:

“1. Decisions of California’s courts which construe the state’s labor statutes and

regulations and otherwise apply relevant California law.

“2. California statutes and regulations which are clear and susceptible to only one

reasonable interpretation.

“3. Federal court decisions which define or circumscribe the jurisdictional scope

of California’s labor laws and regulations or which are instructive in interpreting those

California laws which incorporate, are modeled on, or parallel federal labor laws and

regulations.

“4. Selected opinion letters issued by DLSE in response to requests from private

parties which set forth the policies and interpretations of DLSE with respect to the

application of the state’s labor statutes and regulations to a specific set of facts.

20 “5. Selected prior decisions rendered by the Labor Commissioner or the Labor

Commissioner’s hearing officers in the course of adjudicating disputes arising under

California’s labor statutes and regulations.” (DLSE Manual, June 2002, § 1.1.6, pp. 1-2,

1-3.) The DLSE Manual further states that the particular sources underlying the DLSE

Manual’s specific policies and interpretations, such as opinion letters, administrative

decisions, and decisions by the labor commissioner adopted as a precedent decision, are

indicated in the DLSE Manual. (DLSE Manual, June 2002, §§ 1.1.6.1, 1.1.6.3, p. 1-3.)

The DLSE Manual contains provisions on how to calculate overtime on bonuses.

It distinguishes between flat sum bonuses and percentage of production or other

formulaic bonuses. The DLSE Manual sections 49.2.4.2 and 49.2.4.3 of the DLSE

Manual address overtime on flat sum bonuses. The DLSE Manual section 49.2.4.2

provides: “If the bonus is a flat sum, such as $300 for continuing to the end of the

season, or $5.00 for each day worked, the regular bonus rate is determined by dividing

the bonus by the maximum legal regular hours worked during the period to which the

bonus applies. This is so because the bonus is not designed to be an incentive for

increased production for each hour of work; but, instead is designed to insure that the

employee remain in the employ of the employer. To allow this bonus to be calculated by

dividing by the total (instead of the straight time hours) would encourage, rather than

discourage, the use of overtime. Thus, a premium based on bonus is required for each

overtime hour during the period in order to comply with public policy.” The DLSE

Manual section 49.2.4.3 of the Manual gives an example of how such overtime on a flat

sum bonus is calculated.

21 Because the DLSE Manual does not carry the force of law, this court is not

required to mandate compliance with the formula provided in the DLSE Manual section

49.2.4.2. As explained in Marin, supra, 169 Cal.App.4th at p. 815, “[l]ike the DLSE

interpretation at issue in Skyline, Manual section 49.2.4.2 is ‘a standard of general

application interpreting the law the DLSE enforce[s],’ and ‘not merely a restatement of

prior agency decisions or advice letters.’ [Citation.] Our conclusion is supported by

section 1.1.6.1 of the Manual, which states that if the source of the interpretation is a

statute, regulation, court decision, opinion letter, or ‘Administrative Decision’ or

‘Precedent Decision’ of the Labor Commissioner, that source will be identified in the

Manual. No such sources are mentioned in section 49.2.4.2. The only source cited for

the flat sum bonus rule is ‘public policy.’ Accordingly, section 49.2.4.2 does not have

the force of law.” (Ibid., fn. omitted.) It not only has no precedential value, it carries

very little, if any, persuasive value because the DLSE Manual section 49.2.4.2 does not

cite any supporting legal authority. This lack of any citation to supporting binding

California law is because there is none. There is no state law specifying a formula for

overtime applied to bonuses, particularly flat sum bonuses.

Nevertheless, the court in Marin indicated that the DLSE Manual section 49.2.4.2

provides a reasonable formula for calculating overtime on a flat sum bonus. “The flat

sum bonus formula set forth in sections 49.2.4.2 and 49.2.4.3 of the Manual, which uses a

divisor of straight time, instead of total hours worked to set the regular bonus rate, and a

multiplier of 1.5, rather than 0.5, to fix the bonus overtime due, produces ‘a premium

22 based on bonus’ that the DLSE believes is necessary to avoid encouraging the use of

overtime.” (Marin, supra, 169 Cal.App.4th at pp. 817-818.)

The Marin court noted that, “[i]n the case of a true flat sum bonus where the

employee cannot earn any additional bonus by working overtime hours, excluding such

hours from the divisor prevents them from diluting the regular rate. Including those

hours would give the employer an incentive to impose overtime because the additional

overtime would reduce the cost of overtime by decreasing the regular rate—part of the

situation addressed in the Skyline case.” (Marin, supra, 169 Cal.App.4th at p. 819.)

Although, as indicated by Marin, the DLSE Manual section 49.2.4.2 provides a

reasonable formula for calculating overtime on a flat sum bonus, the formula has not

been enacted as enforceable law and therefore this court cannot enforce it. Furthermore,

enacting the formula in the DLSE Manual section 49.2.4.2 as enforceable law falls within

the domain of the Legislature and IWC, not this court.

In Marin, the court concluded the DLSE Manual flat sum bonus formula did not

apply because the bonus in Marin was a hybrid bonus which functioned primarily as a

production bonus and did not encourage the use of overtime. (Marin, supra, 169

Cal.App.4th at p. 818.) Relying on Skyline and the DLSE Manual policies, the trial court

in Marin held the employer’s overtime formula violated California law, noting that

“‘[t]he law is sparse regarding how an employer is to calculate overtime when awarding

bonuses,’ and finding that, ‘given the paucity of California authority in this area and

contrary Federal authority, there are substantial grounds for differences of opinion.’”

(Marin, at p. 810.) On appeal, the Marin court reversed the trial court, concluding the

23 employer’s formula did not violate either California or federal law and was lawful. (Id.

at p. 806.)

Marin is not dispositive here. Marin concerns a deferred, semi-annual, formulaic

bonus which is primarily a production bonus and was not paid in the same pay period

earned. The Marin bonus was based on the number of years worked for the company and

number of paid hours accrued during a six-month period. In addition, the bonus was paid

at the end of a six-month period, with overtime pay added to the bonus. Furthermore, in

Marin, unlike in the instant case, there was no directly applicable federal regulation or

statute. Here, plaintiff’s bonus is a flat sum bonus paid in the same period earned.

Unlike in Marin, federal regulation, CFR section 788.209(a), applies and provides a

formula used by defendant for computing overtime on plaintiff’s bonus.

Defendant argues that since there is no state law that provides a formula for

computing overtime on bonuses, defendant lawfully applied the federal formula. In

urging this court to find defendant’s use of the federal formula lawful, defendant explains

it had no alternative but to follow the only existing explicit method founded on

enforceable law. By not regulating overtime pay on bonuses, the state has in effect left to

federal regulation computing overtime on bonuses. Congress has specifically permitted

states to enforce overtime laws more generous than the FLSA under the savings clause

(Tidewater, supra, 14 Cal.4th at p. 567; Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th

785, 795 (Ramirez)), yet this state has not enacted any legislation or regulations

specifying a formula for computing overtime paid on bonuses. This court therefore

cannot mandate and enforce compliance with plaintiff’s proposed formula for computing

24 overtime on bonuses, when there is no applicable statute or regulation providing for such

a formula. Even though the federal formula for computing bonus overtime may not

comport with state policy discouraging overtime, defendant’s use of the federal formula

is lawful because it is based on federal law, and there is no state law or regulation

providing an alternative formula.

In the absence of a formula for computing bonus overtime founded on binding

state law, there is no law or regulation the trial court or this court can construe or enforce

as a method for computing overtime plaintiff’s bonuses, other than the applicable federal

regulation, CFR section 778.209(a). This is not a situation in which state and federal

labor laws substantially differ and therefore reliance on federal law is misplaced.

(Skyline, supra, 165 Cal.App.3d at pp. 247-249; Ramirez, supra, 20 Cal.4th at p. 798.)

Defendant therefore lawfully used the federal formula for computing overtime on

plaintiff’s flat sum bonuses. In turn, the trial court properly granted defendant’s motion

for summary judgment.3

3 During oral argument plaintiff untimely raised new legal theories not previously briefed by plaintiff and authority not included in plaintiff’s appellate briefs. Plaintiff argued for the first time the flat sum bonus was not actually a bonus but rather salary, and the flat sum bonus was artificially labeled a bonus, constituting a subterfuge that operates to evade overtime pay laws by reducing the regular hourly rate when overtime hours are worked on the weekend. The legal authority, raised for the first time during oral argument, included Huntington Memorial Hospital v. Superior Court (2005) 131 Cal.App.4th 893; Walling v. Youngerman-Reynolds Hardwood Co. (1945) 325 U.S. 419, 424-425; 29 CFR § 778.203 (premium pay for work on Saturdays, Sundays, and other “special days”); 29 CFR § 778.327(b) (temporary or sporadic reduction in schedule); and 29 CFR § 778.502 (artificially labeling part of the regular wages a “bonus”). We do not address in this decision such untimely, waived theories and legal authority on the grounds plaintiff did not include them in its appellate opening brief or [footnote continued on next page]

25 V

DISPOSITION

The judgment is affirmed. Defendant is awarded its costs on appeal.

CERTIFIED FOR PUBLICATION

CODRINGTON

J.

We concur:

HOLLENHORST

Acting P. J.

KING

J.

reply; plaintiff did not provide defendant or this court with notice before oral argument of plaintiff’s intent to rely on new legal authority and raise new theories; and defendant therefore did not have an opportunity to review and provide a fully informed response to such new theories and legal authorities. Furthermore, without suggesting whether plaintiff’s new theories and legal authority have merit, we decline to consider them because plaintiff has not demonstrated good cause for raising them for the first time during appellate oral argument. (See Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 Cal.App.4th 847, 894, fn. 10 [points raised in appellate reply brief for the first time will not be considered, unless good reason is shown for failure to present them before]; Acquire II, Ltd. v. Colton Real Estate Group (2013) 213 Cal.App.4th 959, 977, fn. 12; Estate of McDaniel (2008) 161 Cal.App.4th 458, 463, quoting People v. Harris (1992) 10 Cal.App.4th 672, 686 [“‘contentions raised for the first time at oral argument are disfavored and may be rejected solely on the ground of their untimeliness.’”].

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