Marin v. Costco Wholesale Corporation (Labor and Employment Law)

Filed December 23, 2008

First District, Division 1

Cite as 2008 SOS 6929

Employer’s Overtime Computation Formula Disputed by Employee Found Correct

The issue stems from a complaint filed by Anthony Marin (plaintiff) against Costco Wholesale Corporation (defendant) in a dispute regarding the computation of overtime compensation on semi-annual bonuses paid to hourly employees, alleging violations alleging Labor Code violations and unfair business practices (Business & Professional Code, section 17200).

Marin was an employee who worked for Costco and paid hourly from October 1989 to February 2004.

Costco moved for summary judgment or adjudication on the ground that Marin had never worked more than 1,000 hours in any relevant bonus period. In response, Marin noted that bonuses are awarded under defendant’s plan based on hours paid, including vacation and sick time, as well as hours worked, and asserted that he had reached the 1,000 paid hours threshold in some bonus periods.

The court granted summary adjudication against Marin on all causes of action on the ground that he had not worked more than 1,000 hours in a bonus period, but granted his request to add a new plaintiff who had standing to prosecute the claims he alleged.

Marin was also granted leave to file a second complaint, which contained the following amendments:

• three new named plaintiffs


• changed the class definitions to encompass a “Subclass A” confined to hourly employees who had worked more than 1,000 hours in a bonus period, and a “Subclass B” confined to those who had been paid for more than 1,000 hours in a bonus period even though they worked less than 1,000 hours in the period. The court later amended the Subclass B definition to include simply those paid for more than 1,000 hours in a bonus period.

Marin then moved for summary judgment or adjudication, and defendant moved for summary adjudication of the Subclass B claims and it did not dispute that it was liable to Subclass A under the court’s December 2004 ruling.

In its ruling on the motions, the court concluded the following facts:

• that use of plaintiffs’ formula to compute the bonus overtime owed to both subclasses was based on the decision in Skyline, supra, 165 Cal.App.3d 239, and sections of the Division of Labor Standards Enforcement’s (DLSE) 2002 Enforcement Policies and Interpretations Manual (Manual) distinguishing “flat sum” bonuses (Manual section 49.2.4.2) from bonuses “based on a percentage of production or some formula other than a flat amount” (Manual section 49.2.4)

The court also provided calculations showing that overtime on the bonus increased under both sides’ formula as the amount of overtime work increased, and that the increases were larger under plaintiffs’ formula.

The court granted both subclasses summary adjudication on the issue of liability on causes of action concerning the correct formula, and on the cause of action under the unfair competition law. It granted defendant summary adjudication on a cause of action for waiting time penalties.

Both the plaintiff and the defendants sought an appeal.

The First District court of appeal held that the employer's formula for paying certain employees a bonus based on hours paid up to a specified maximum did not violate California law. Further it held that the DLSE interpretation of such bonuses as "flat sum" bonuses for purposes of determining overtime premium was void as there was nothing in federal overtime regulation prohibit the use of "hours paid" method of calculating bonus overtime.