Last week, a California appellate court decided Advanced-Tech Security Services, holding that the Labor Code does not require an employer to compensate an employee at a rate higher than one and one-half times the regular rate of pay for overtime hours worked on a work day when an employee already receives a premium pay rate.

Advanced-Tech employed the plaintiff as a security guard. At the time she began her employment, she was provided with Advanced-Tech’s Employee Handbook which stated that all hours she worked in excess of 40 hours per week would be compensated at a rate of one and one-half times her regular rate. The Handbook also identified six holidays which if she worked, she would be paid a premium rate of one and one-half the regular rate of pay for that day’s work.

During the week of September 4, 2006, plaintiff worked 12 hours on Monday, which was Labor Day, 12 hours both Tuesday and Wednesday, and 8 hours on Thursday, Friday and Saturday for a total of 60 hours. Her paycheck reflected payment of one and one-half times her regular rate for the 4 hours of overtime she worked on Tuesday and Wednesday of that week, as well as the premium pay of one and one-half times for the 12 hours she worked on Labor Day. Plaintiff argued that the time and one-half she was paid for working on Labor Day was her regular rate of pay pursuant to the Employee Handbook, and she was entitled to be paid one and one-half times the premium rate for the hours she worked on Labor Day.

The Labor Code requires daily overtime compensation at a rate of one and one-half times the regular rate of pay after 8 hours of daily work and 40 hours of weekly work. The court found no indication of legislative intent to treat premium pay as a regular rate of pay. Accordingly, the appellate court concluded that Advanced-Tech had paid the plaintiff in compliance with the Labor Code, finding nothing which prohibited an employer from crediting premium pay for a holiday against weekly overtime. In other words, the court concluded that premium pay is not considered a "regular rate" of pay a employee receives for a normal workday.

The court did, however, leave open the possibility that the plaintiff could pursue a breach of contract claim against Advanced-Tech based on the plaintiff’s allegation that Advanced-Tech’s Employee Handbook had set the regular rate at a higher amount than she was paid. Employers should therefore be careful in how they define "regular rate" in their Employee Handbook to avoid any claim, like the plaintiff’s here, that the "regular rate" on certain work days equals premium pay.