Levanoff v. Dragas

Filed 6/25/21

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

CHRISTOPHER LEVANOFF et al.,

Plaintiffs and Appellants, G058480, G058709

v. (Super. Ct. No. 30-2011-00511808)

MATTHEW DRAGAS et al., OPINION

Defendants and Respondents.

Appeals from orders of the Superior Court of Orange County, Glenda
Sanders, Judge. Affirmed.
Mahoney Law Group, Kevin Mahoney, Katherine J. Odenbreit; Ferguson
Case Orr Paterson, Wendy C. Lascher and John A. Hribar for Plaintiffs and Appellants.
CDF Labor Law, Timothy M. Freudenberger, Amy S. Williams, Nancy N.
Lubrano; Duckor, Spradling, Metzger & Wynne, William Patrick Keith and Scott L.
Metzger for Defendants and Respondents.

* * *
 INTRODUCTION
The issue presented by this appeal is whether defendant employers violated
California law in their method of calculating the regular rate of pay for purposes of
compensating overtime hours of employees who worked at different rates of pay within a
single pay period (dual rate employees). Defendants used the rate-in-effect method, by
which dual rate employees are paid for overtime hours based on the rate in effect when
the overtime hours began. Plaintiffs contend that California law required defendants to
use the weighted average method, by which dual rate employees are paid for overtime
based on an hourly rate calculated by adding all hours worked in one pay period and
dividing that number into the employee’s total compensation for the pay period.
Plaintiffs are employees of Buffalo Wild Wings Restaurants owned and/or
operated by defendants. In their lawsuit against defendants, plaintiffs asserted individual
and class claims under various provisions of the Labor Code and the California Unfair
Competition Law, and claims for violations of the Labor Code Private Attorneys General
Act of 2004, Labor Code section 2698 et seq. (PAGA). The trial court certified eight
classes and two subclasses, but later decertified all classes except for a subclass of dual
rate employees who allegedly were underpaid by defendants for overtime hours worked.
We refer to this subclass as the dual rate overtime subclass.
By agreement of the parties, a bench trial was conducted on the issue of
liability under PAGA for underpayment of overtime hours worked by dual rate
employees. In a thorough statement of decision, the trial court found, among other
things, that defendants did not violate California employment law by using the
rate-in-effect method for calculating the overtime rate of pay. Based on the ruling in the
bench trial, the trial court decertified the dual rate overtime subclass and dismissed the
PAGA claims. Plaintiffs appeal from the order decertifying the dual rate overtime
subclass and the order dismissing the PAGA claims.

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 We affirm. We agree with the trial court and hold defendants did not
violate California law by using the rate-in-effect method for calculating the regular rate
of pay for purposes of establishing the overtime rate of pay for dual rate employees. The
method employers must always use is an issue we need not decide: The only issue before
us is whether under the facts of this case defendants’ use of the rate-in-effect method was
lawful. California law does not mandate the use of the weighted average method, and
defendants’ dual rate employees, including plaintiffs, overall received net greater
overtime pay under the rate-in-effect method than they would have received under the
weighted average method. Because defendants did not violate California law by using
the rate-in-effect method, the trial court did not err by decertifying the dual rate overtime
subclass and dismissing the dual rate overtime PAGA claim.

ALLEGATIONS AND PROCEDURAL HISTORY
I.
The Parties and Allegations of the Complaints
Plaintiffs are Christopher Levanoff, Alison Diaz, Andrew Gaxiola, and
Jenna Steed (collectively Plaintiffs). They were employees of several Buffalo Wild
Wings Restaurants owned and/or operated by defendants Matthew Dragas, SoCal Wings
LLC, SC Wings Buena Park, SC Wings Aliso Viejo, LLC, SC Wings Mission Viejo,
LLC, SC Wings Block, LLC, and Dragas Homes, Inc. (collectively Defendants).
Plaintiffs were employed in various capacities, including server, bartender, certified
trainer, manager-in-training, and shift lead.
In 2011, Plaintiffs initiated this lawsuit on behalf of themselves and a
plaintiff class. The Second Amended Complaint alleged eight causes of action:
(1) failure to pay overtime wages, (2) failure to provide meal periods, (3) failure to
provide rest periods, (4) failure to pay wages upon ending employment, (5) failure to
keep accurate payroll records, (6) violation of the California Unfair Competition Law,

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Business and Professions Code section 17200 et seq., (7) violation of Labor Code section
558, and (8) violation of PAGA. The Second Amended Complaint alleged nine classes
and two subclasses. Relevant here is subclass I within class 1, the dual rate overtime
subclass, alleged to consist of “[a]ll current and former California hourly non-exempt
employees who work or worked for Defendants during the Class Period who worked over
eight (8) hours in a day or forty (40) hours in a week without receiving proper overtime
payments because the overtime payments were calculated using the lower regular rate of
pay.” The class period was “September 28, 2007 to the present.”
In 2014, the trial court partially granted Plaintiffs’ motion for class
certification and certified all classes and subclasses, with one exception not relevant to
this appeal.
Plaintiffs filed the Third Amended Complaint in January 2015. It is the
operative pleading and has the same causes of action and the same classes and subclasses
as alleged in the Second Amended Complaint.
II.

The Dual Rate Overtime PAGA Claim and Subclass
None of the complaints alleged that Defendants violated California
employment law by using the rate-in-effect method instead of the weighted average
method to calculate regular rate of pay for determining overtime pay of dual rate
employees. Instead, the dual rate overtime subclass claim in the Second Amended
Complaint and the Third Amended Complaint was based on allegations that Defendants
paid certain employees different rates of pay for performing the same type of work during
the same pay period and, as a result, underpaid certain employees for overtime hours.
In the motion for class certification, Plaintiffs asserted that Defendants
violated California law by failing to use the weighted average method for calculating
regular rates of pay used for calculating the rate of overtime pay. At a pretrial hearing on

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motions in limine, the trial court, over Defendants’ objection, allowed Plaintiffs “to keep”
the dual rate overtime claim based on failure to use a weighted average and found “it is
both a PAGA issue and a class action issue.”
Later, a proposed statement of joint stipulated facts defined the dual rate
overtime subclass to include “any non-exempt employee[s] of Defendants who were paid
at two or more different rates of pay for different work in a workweek in which they
worked overtime from the beginning of the statutory period as determined by the Court
through September 8, 2015.”
III.

Class Decertification with Exception of
Dual Rate Overtime Subclass
In June 2017, the trial court decertified the class with the exception of the
dual rate overtime subclass. As of that date, therefore, Plaintiffs’ claims consisted of the
dual rate overtime subclass claim and the PAGA claim, which was limited to a dual rate
1
overtime PAGA claim.
Two months later, Plaintiffs submitted a “Post Decertification Proposed
Trial Plan” (the Trial Plan) in which Plaintiffs proposed that the dual rate overtime
PAGA claim be tried to the court and “[f]ollowing the bench trial, if there are any class or
legal claims left to be decided that were not determined in the bench trial they will be
presented to a jury as they relate to the Dual Rate [Overtime] Subclass.” According to
the Trial Plan, “[t]he dual rate violations will be determined during the PAGA trial, so
with respect to liability, there should be no issue for the jury to determine.” In addition,
the Trial Plan provided that the trial court’s written findings establishing liability, if any,
would be binding on the jury, and the jury’s sole task with respect to the dual rate
overtime subclass would be to award damages.

1
PAGA claims are not subject to class certification requirements. (Arias v. Superior
Court (2009) 46 Cal.4th 969, 982-983.)

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 In January 2018, the trial court denied a motion in limine by Defendants to
exclude all evidence and argument on the dual rate overtime issue. The court ruled that
the dual rate overtime issue involved questions of fact and could not be decided based on
the pleadings and undisputed facts.
IV.
Bench Trial on Dual Rate Overtime PAGA Claim
A bench trial on the liability portion of Plaintiffs’ dual rate overtime PAGA
claim commenced on January 31, 2018, and continued off and on until late June. Ten
witnesses, including two experts, offered live testimony.
At trial, both Plaintiffs’ expert and Defendants’ expert testified that
Levanoff and Diaz (the only dual rate overtime subclass plaintiffs) received greater
overtime pay under the rate-in-effect method than they would have received under the
weighted average method. Defendants’ expert also concluded the dual rate overtime
PAGA group members received net greater overtime time pay because Defendants had
used the rate-in-effect method. Plaintiffs’ expert agreed. Plaintiffs’ expert testified that
the dual rate overtime PAGA group members overall received $2,065.74 net greater
overtime pay because Defendants had used the rate-in-effect method.
The trial court ruled in favor of Defendants and, in February 2019, issued a
lengthy and thorough statement of decision. The statement of decision provided the
following summary: “First, Plaintiffs failed to exhaust the administrative prerequisites
necessary to pursue their PAGA claim based on Defendants’ use of the rate-in-effect
method of overtime calculation (‘the dual rate’ claim). Second, Plaintiffs’ dual rate
PAGA claim is barred by the statute of limitations. Third, on the merits, Plaintiffs failed
to prove that Defendants’ use of a rate-in-effect method to calculate overtime in dual rate
workweeks violated any labor law including Labor Code section 1194 upon which they
relied in their Notice to the LWDA [Labor and Workforce Development Agency] and

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certain Defendants. Finally, even if Defendants did violate the law by using the
rate-in-effect method to calculate overtime, the impact on employees was de minimis.”
The trial court then made findings and conclusions, which we summarize in
the following 11 points:
1. There is no binding state or federal law requiring the use of a particular
method of calculating overtime in dual rate workweeks “in general or in the unique
factual circumstances of this case.”
2. The California Division of Labor Standards Enforcement Policies and
Interpretations Manual (June 2002 rev.) (the DLSE Manual) has adopted the weighted
average method of computation. But the DLSE Manual’s adoption of the weighted
average method is not binding and is accorded no deference because “it reflects no
‘expertise and special competence’ with the problem at issue,” did not rely on a rationale
that had been articulated in prior letters, and relied on inapposite law.
3. Alvarado v. Dart Container Corp. of California (2018) 4 Cal.5th 542
(Alvarado) does not mandate use of the weighted average method of computation. The
Supreme Court’s comments about the weighted average method in that opinion were
dicta.
4. California law requires employers to use a method of compensation that
is most economically beneficial to the group of employees at issue. “California has long
recognized that employer compensation practices must be evaluated based upon the
impact of the practice on the entire group of employees at issue during the relevant
statutory period—not on an employee by employee, day by day, week by week or pay
period by [pay] period basis.”
5. Plaintiffs failed to prove that use of the weighted average method would
have better protected Defendants’ dual rate employees. The undisputed evidence
demonstrated that use of the rate-in-effect method produced greater economic benefit to
dual rate employees as a whole over the relevant time period.

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 6. Use of the rate-in-effect method was “fair and neutral” because it
resulted in a net economic benefit for Defendants’ dual rate employees as a whole.
“[T]he evidence demonstrates that most employees received significantly more overtime
compensation than they would have received had Defendants used the weighted average
method.”
7. The undisputed evidence demonstrated that Defendants selected the
rate-in-effect method because it would provide the greatest overall compensation to dual
rate employees.
8. “[T]he rate-in-effect method is arguably more transparent than the
weighted average method because with the rate-in-effect method the employee’s wage
statement reflects the hours worked and associated rates of pay, whereas the weighted
average method requires the employee to conduct a series of mathematical calculations to
determine whether her compensation was accurate.”
9. Under federal law, the rate-in-effect method is lawful if the overtime
compensation was paid pursuant to an agreement or understanding arrived at between the
employer and the employee in advance of performance of the work. (29 U.S.C.
§ 207(g)(2); 29 C.F.R. § 778.419.) Here, the requirement of an agreement or
understanding was satisfied. The evidence showed that all employees were told, before
performing any work, the method for calculating pay for non-overtime and overtime
hours if the employee performed different jobs at different rates of pay. “After being
informed of this method of compensation, all employees agreed to these terms by
performing work and accepting the compensation for such work for the entire period of
their employment.”
10. The maxim de minimis non curat lex (de minimis principle) applies and
precludes liability. “This case is an illustration of expensive litigation which results in no
real benefit to complainant but may injure others. [Citation.] Even aggregated, the

8
difference in methodologies massively benefits the employees as a whole, and any
negative impact is de minimis.”
11. The court concluded: “This claim does not vindicate the rights of
allegedly aggrieved employees. The dual rate claim appears to be an afterthought
contemplated long after the original complaint was filed—a claim that was never
presented to the LWDA.”
The trial court’s decision resolved the dual rate overtime PAGA claim.
What remained were the other PAGA Labor Code violation claims, the dual rate overtime
subclass claim, and the individual claims.
V.

Decertification of Dual Rate Overtime Subclass
and Dismissal of PAGA Claims
Based on the trial court’s ruling in the trial of the dual rate overtime PAGA
claim, Defendants moved to decertify the dual rate overtime subclass. In August 2019,
the trial court granted the motion and decertified the dual rate overtime subclass. The
court found that Plaintiffs had agreed in the Trial Plan to a bench trial on the PAGA
claim based on the dual rate overtime theory and had agreed the court’s decision would
be binding on the jury. “Having done so, Plaintiffs, who proposed a bench trial on the
PAGA claim, are now bound by the Court’s finding that Defendants did not violate any
law by their use of the rate-in-effect method of calculating the overtime rate. That
finding mandates decertification and Defendants’ motion is granted.”
In October 2019 Plaintiffs filed a notice of appeal from the order
decertifying the dual rate overtime subclass. This appeal is case No. G058480.
Thereafter, the parties stipulated to dismissal of the remaining PAGA
claims. Based on that stipulation, the trial court dismissed the remaining PAGA claims
with prejudice. As a consequence, only Plaintiffs’ individual claims remain.

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 Plaintiffs filed a notice of appeal from the order dismissing the PAGA
claims. This appeal is case No. G058709. We granted the parties’ stipulated motion to
consolidate the two appeals for all purposes.
DISCUSSION
I.
Appealability and Standard of Review
The order decertifying the dual rate overtime subclass is appealable under
the “death knell doctrine” because that order entirely terminated the class claims. (In re
Baycol Cases I & II (2011) 51 Cal.4th 751, 758.) The order dismissing the PAGA claims
also is appealable under the death knell doctrine. (Miranda v. Anderson Enterprises, Inc.
(2015) 241 Cal.App.4th 196, 200-203.) Pursuant to Code of Civil Procedure section 906,
we may review the trial court’s decision on the dual rate overtime PAGA claim because
that decision “involves the merits or necessarily affects the judgment or order appealed
from.” (Code Civ. Proc., § 906.)
Orders regarding class certification are reviewed under the abuse of
discretion standard. (Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319,
326-327.) A trial court ruling supported by substantial evidence generally will not be
disturbed unless (1) improper criteria were used or (2) erroneous legal assumptions were
made. (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 435-436.) A trial court’s
decision that rests on an error of law is an abuse of discretion. (In re Tobacco II Cases
(2009) 46 Cal.4th 298, 311; Pfizer Inc. v. Superior Court (2010) 182 Cal.App.4th 622,
629.)
II.

The Scope of Appeal Is Limited to the Stated Reasons for
Decertifying the Dual Rate Overtime Subclass
Defendants argue we need not reach the issue of how to calculate the
regular rate of pay for dual rate employees because common issues of law or fact did not

10
 2
predominate. Defendants argue that Plaintiffs never pleaded the dual rate overtime
theory of liability, the named plaintiffs received more overtime compensation under the
rate-in-effect method, and the majority of the subclass members never experienced a
workweek in which the rate-in-effect method produced an underpayment of overtime.
The scope of our review of the order decertifying the dual rate overtime
subclass is limited to the reasons stated by the trial court. “Under ordinary appellate
review, we do not address the trial court’s reasoning and consider only whether the result
was correct. [Citation.] But when denying class certification, the trial court must state its
reasons, and we must review those reasons for correctness. [Citation.] We may only
consider the reasons stated by the trial court and must ignore any unexpressed reason that
might support the ruling.” (Knapp v. AT&T Wireless Services, Inc. (2011) 195
Cal.App.4th 932, 939.)
In the order decertifying the dual rate overtime subclass, the trial court gave
a single reason for decertification: “Plaintiffs, who proposed a bench trial on the PAGA
claim, are now bound by the Court’s finding that Defendants did not violate any law by
their use of the rate-in-effect method of calculating the overtime rate. That finding
mandates decertification and Defendants’ motion is granted.” The trial court gave no
other reason for ordering decertification. Any other issue regarding class certification is
beyond the scope of our review.
Defendants are correct in asserting that none of Plaintiffs’ complaints
alleged the dual rate overtime claim that was tried. The theory first appeared, at least in

2
The party seeking class certification must demonstrate the existence of an ascertainable
and sufficiently numerous class, a well-defined community of interest, and substantial
benefits from certification that make a class action superior to the alternatives. (Brinker
Restaurant Corp. v. Superior Court (2012) 53 Cal.4th 1004, 1021 (Brinker).) The
community of interest requirement has three factors: (1) common questions of law or
fact predominate; (2) class representatives have claims or defenses typical of the class;
and (3) class representatives can adequately represent the class. (Ibid.)

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court-filed documents, in Plaintiffs’ motion for class certification. But the trial court, by
allowing Plaintiffs “to keep” their dual rate overtime theory, in effect granted them leave
to amend to state that theory as both a class claim and a PAGA claim. Defendants do not
argue they have suffered in prejudice as a consequence.
Defendants argue we need not reach the issue of calculating rate of pay for
dual rate employees because the dual rate overtime PAGA claim is barred by the statute
of limitations and by Plaintiffs’ failure to exhaust administrative remedies. In the
statement of decision, the trial court found that Plaintiffs had failed to exhaust their
administrative remedies as to the dual rate overtime PAGA claim and that that claim was
3
time-barred. Those findings apply, however, only to that PAGA claim. The purpose of
the bench trial was to decide the issue of liability for both the dual rate overtime PAGA
claim and the class claim “so with respect to liability, there should be no issue for the jury
to determine.” Resolution of the dual rate overtime PAGA claim was necessary for
purposes of the class claim regardless of the disposition of the PAGA claim.

III.

Defendants Did Not Violate California Employment Law
by Using the Rate-in-effect Method
Plaintiffs’ dual rate overtime claims (both the PAGA claim and the class
claim) asserted failure to pay overtime wages pursuant to Labor Code sections 510 and
1194. Plaintiffs contended that Defendants violated Labor Code section 1194, which
permits an employee to recover by means of a civil action the full amount of legal
overtime compensation (id., § 1194, subd. (a)), by using the rate-in-effect method of
calculating the regular rate of pay of dual rate employees instead of the weighted average
method.

3
Plaintiffs’ failure to challenge those findings on appeal means the order dismissing the
PAGA claim would be affirmed regardless of our decision on the issue whether
Defendants violated California law by using the rate-in-effect method.

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A. The Weighted Average Method and the Rate-in-effect Method
Wage and hour claims are governed by provisions of the Labor Code and
by 18 wage orders adopted by the Industrial Welfare Commission (IWC). (Brinker,
supra, 53 Cal.4th at p. 1026.) IWC wage orders are accorded the dignity of statutes and
are presumptively valid. (Id. at p. 1027.)
Labor Code section 510 and IWC Wage Order No. 5-2001 (IWC Wage
4
Order No. 5) require that restaurant workers be compensated for “[a]ny work in excess
of eight hours in one workday and any work in excess of 40 hours in any one workweek”
at the rate of no less than 1.5 times the employee’s “regular rate of pay.” (Lab. Code,
§ 510, subd. (a); see IWC Wage Order No. 5, §§ 2(P)(1), 3(A)(1)(a).) Work in excess of
12 hours in one day and in excess of eight hours on any seventh day of a workweek must
be compensated at the rate of no less the twice the employee’s “regular rate of pay.”
(Lab. Code, § 510, subd. (a); see IWC Wage Order No. 5, § 3(A)(1)(b).)
Neither Labor Code section 510 nor IWC Wage Order No. 5 defines the
term “regular rate of pay.” When an employee works at the same rate of pay during a
workweek, calculation of regular rate of pay presents no complications. But some
employees work at different rates of pay rather than a fixed rate during a single
workweek. For these dual rate employees, two methods for calculating the regular rate of
pay have been developed.
One method, called the weighted average method, establishes the regular
rate of pay by “adding all hours worked in the week and dividing that number into the
total compensation for the week.” (DLSE Manual, supra, § 49.2.5.) The weighted
average method ensures that when a dual rate employee works overtime hours during a

4
IWC Wage Order No. 5 applies to restaurant workers (Brinker, supra, 53 Cal.4th at
p. 1027 & fn. 7) and is found at California Code of Regulations, title 8, section 11050.
IWC Wage Order No. 5 provides essentially the same overtime rules as Labor Code
section 510 (see Cal. Code Regs., tit. 8, § 11050, subd. (3)(A)(1)).

13
low-paying shift, the employee’s compensation will be based on a regular rate of pay that
accounts for higher pay rates earned during higher paying shifts. (Alvarado, supra,
4 Cal.5th at pp. 569-570.)
Under the other method, called rate-in-effect method, the regular rate of pay
is the hourly rate in effect at the time the overtime hours began. (Dept. of Industrial
Relations, DLSE, Chief Counsel H. Thomas Cadell, Jr., Opn. Letter No. 1992.05.14,
Calculation of Regular Rate of Pay (May 14, 1992), p. 1
; see 29 U.S.C. § 207(g)(2); 29
C.F.R. §§ 778.417, 778.419.) The rate-in-effect method ensures that a dual rate
employee who works overtime hours during a higher paying shift will be compensated
based on that higher rate. The rate-in-effect method has the added benefit of being a
simpler method for computing overtime pay than the weighted average method. (29
C.F.R. § 778.416.)
The DLSE Manual has endorsed the weighted average method for
calculating the regular rate of pay for dual rate employees. Section 49.2.5 of the DLSE
Manual states: “Where two rates of pay are paid during a workweek, the California
method for determining the regular rate of pay for calculating overtime in that workweek
mirrors the federal method, based upon the weighted average of all hourly rates paid.
(See 29 CFR § 778.115) Initially, therefore, it must be predicated upon the finding that
there are established hourly rates being paid. The rate will be established by adding all
hours worked in the week and dividing that number into the total compensation for the
week. This is consistent with the provisions of Skyline v. DIR (1985) 165 Cal.App.3d
239, since the hourly rates have already been established and what needs to be
established now is the weighted average of those rates for purposes of overtime
payment.” (Italics added.)
The DLSE Manual permits one exception to the weighted average method.
“In the situation where an employee is paid two rates during the course of the day and

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one of those rates is a statutorily-mandated rate (i.e., prevailing wage) the regular rate for
calculating the overtime rate for work performed on the public works project must be
based on the higher of either the weighted average or the prevailing wage rate in effect at
the time the worked is performed.” (DLSE Manual, supra, § 49.2.6, fn. omitted.)
Federal law requires that certain overtime hours be compensated at no less
than 1.5 times the “regular rate.” (29 U.S.C. § 207(a)(2).) The “regular rate” is defined
by federal regulation as an hourly rate that is determined by taking an employee’s total
regular remuneration for employment in any workweek and dividing by the total number
of hours actually worked in that workweek for which such compensation was paid. (29
C.F.R. § 778.109.) When an employee is subject to more than one rate of pay, federal
regulations define the regular rate of pay as the “the weighted average of such rates.” (29
C.F.R. § 778.115; see 29 U.S.C. § 207(g); 29 C.F.R. § 778.109.) The weighted average
is the employee’s compensation during the pay period at all rates divided by the total
number of hours worked at all jobs. (29 C.F.R. § 778.115.)
Federal law permits employers to compute overtime pay for dual rate
employees by means other than the weighted average method under certain
circumstances and if certain conditions are met. (29 U.S.C. § 207(g); 29 C.F.R.
§ 778.415–778.419.) One such circumstance is when an employee reaches an agreement
in advance of the performance of the work to be paid during overtime hours “at a rate not
less than one and one-half times the hourly nonovertime rate established for the type of
work he is performing during such overtime hours.” (29 C.F.R. § 778.419(a).)

B. California Law Does Not Mandate Use of the Weighted Average Method
The trial court concluded that California law does not mandate the use of
either method for calculating regular rate of pay “in general or in the unique factual
circumstances of this case.” Plaintiffs disagree: They argue that in Alvarado, supra, 4
Cal.5th 542, the California Supreme Court approved the DLSE Manual, which requires

15
the use of the weighted average method, and thereby mandated the use of that method to
calculate regular rates of pay.
Statements in the DLSE Manual are not binding. (Troester v. Starbucks
Corp. (2018) 5 Cal.5th 829, 841.) Although the DLSE Manual is the product of efforts to
organize enforcement policies and achieve a measure of uniformity, it was prepared
5
without input from employers, employees, or the general public. (Alvarado, supra,
4 Cal.5th at p. 555.) Sections 49.2.5 and 49.2.6 of the DLSE Manual are not restatements
or summaries of the agency’s decision in prior cases and advice letters; they select
between two competing interpretations of the law and develop an interpretation intended
to function as a rule to be followed prospectively. (See Alvarado, supra, at p. 556.) The
DLSE Manual sections dealing with calculating regular rates of pay for dual rate
employees are, therefore, regulations within the meaning of the Administrative Procedure
Act (APA), Government Code section 11340 et seq. (Alvarado, supra, 4 Cal.5th at
p. 556.)
We are not bound by, and accord no deference to, sections 49.2.5 and
49.2.6 of the DLSE Manual because it was not adopted in accordance with the
requirements of the APA. “[W]hen the APA applies, administrative policies that are not
adopted in accordance with its requirements are ‘void’ regulations that are ‘not entitled to
any deference.’” (Alvarado, supra, 4 Cal.5th at p. 556.)
Plaintiffs argue that California law requires the use of the weighted average
method because it was approved by the California Supreme Court in Alvarado, supra,
4 Cal.5th 542. But Alvarado addressed an issue entirely different from the one presented
in this case: The issue presented in Alvarado was how to calculate an employee’s
overtime pay rate when the employee had earned a flat-sum bonus (an attendance bonus

5
What input we do have on DLSE Manual section 49.2.5 is the evidence presented at
trial in this case, which supports a conclusion that the rate-in-effect method may well (as
here) provide greater benefit and protection to employees.

16
for working a full shift on a Saturday or Sunday) during a pay period. (Id. at p. 549.)
The question in particular was which divisor (the number of hours) to use for purposes of
calculating the per-hour value of the bonus. (Ibid.) The court concluded the divisor is
the number of nonovertime hours the employee actually worked during the relevant pay
period, not the number of nonovertime hours that exist in the pay period or the number of
nonovertime and overtime hours actually worked by the employee during the pay period.
(Id. at pp. 549, 568.) This conclusion, the court noted, was consistent with the DLSE’s
enforcement policy, embodied in section 49.2.4.2 of the DLSE Manual, and the court,
though not deferring to that policy, considered it to be persuasive. (Alvarado, supra, at
pp. 567-568.)
After reaching that conclusion, the Supreme Court, in addressing arguments
advanced by the defendant employer, noted “[i]t might be argued that defendant’s
attendance bonus is different from other types of flat-sum compensation because the
bonus rewards only weekend work.” (Alvarado, supra, 4 Cal.5th at p. 569.) The court
found that argument unpersuasive because it “misunderstands what regular rate of pay
is.” (Ibid.) The court, citing DLSE Manual section 49.2.5, stated that regular rate of pay
is a weighted average reflecting work based on varying rates and, therefore, “it is often
the case that overtime worked during a low-paying shift is compensated based on an
overtime pay rate that reflects, as part of the weighted average, higher pay rates earned
during higher-paying shifts.” (Alvarado, supra, 4 Cal.5th at pp. 569-570.)
Although the Alvarado court recited the weighted average method, the
issue decided in Alvarado was the number of hours to use as a divisor for purposes of
calculating the per-hour value of a flat-sum bonus. The issue in this case is how to
calculate the regular rate of pay to use to determine the hourly overtime rate of dual rate
employees. (Alvarado, supra, 4 Cal.5th at p. 568.)
In Alvarado, the relevant provision of the DLSE Manual that dealt with the
matter of flat-sum bonuses was section 49.2.4.2. (Alvarado, supra, at pp. 567-568.) The

17
court reached a conclusion “consistent with the DLSE’s policy” reflected in section
49.2.4.2. (Alvarado, supra, at p. 568.) In the present case, the relevant provisions of the
DLSE Manual are sections 49.2.5 and 49.2.6. The Alvarado court reached no
conclusions about those two sections. In its brief, one paragraph discussion of the
weighted average method, the Alvarado court simply cited Labor Code section 246,
subdivision (l)(1) (which refers to regular rate of pay without defining it), DLSE Manual
section 49.2.5 (which is not binding and owed no deference), and 29 C.F.R. section
778.115 (which sets forth the federal weighted average policy). (Alvarado, supra, 4
Cal.5th at p. 569.) Previously in its opinion, the Alvarado court had explained that the
DLSE Manual was not entitled to special deference and the manual’s interpretation could
be adopted “so long as we exercise our independent judgment” and “we are persuaded
that it is correct.” (Id. at p. 561.) The Alvarado court did not exercise independent
judgment with respect to or engage in any analysis of DLSE Manual section 49.2.5, the
section at issue in this case.
Further, the Alvarado court rejected using a 40-hour work week, instead of
actual hours worked, as the divisor for calculating the per-hour value of a flat-sum bonus
because “[s]uch a rule would contradict the principle that our state’s labor laws must be
liberally construed in favor of worker protection.” (Alvarado, supra, 4 Cal.5th at
pp. 566-567.) As we shall explain at length in subpart III.C.3, the evidence at trial
demonstrated that the rate-in-effect method would better protect dual rate employees.
The Alvarado court’s comments about calculating regular rate of pay for
dual rate employees were unnecessary to the court’s decision and therefore constituted
dicta. (People v. Vang (2011) 52 Cal.4th 1038, 1047, fn. 3 [dictum (plural, dicta) is a
judicial comment that is unnecessary to the decision at hand].) The California Supreme
Court long ago explained the effect of dicta: “It is the invariable rule, well understood by
the profession, that an opinion of this court becomes authority only upon the point
decided, and that obiter dicta are of no binding force or effect.” (Morse v. De Ardo

18
(1895) 107 Cal. 622, 626, italics omitted; see Santisas v. Goodin (1998) 17 Cal.4th 599,
620 [a decision is authority only for the points actually considered and actually decided].)
Dictum, though not precedential, may be considered persuasive (People v.
Vang, supra, 52 Cal.4th at p. 1047, fn. 3) if “‘it demonstrates a thorough analysis of the
issue or reflects compelling logic’” (Candelore v. Tinder, Inc. (2018) 19 Cal.App.5th
1138, 1149; see People v. Bueno (2019) 32 Cal.App.5th 342, 350 [courts are to be guided
by dictum if it remains “‘“analytically persuasive”’”]). The Alvarado court’s comments
about the weighted average method did not reflect an analysis of the issue of calculating
regular rates of pay for dual rate employees. The Alvarado court had no cause to decide
whether to use the weighted average method or the rate-in-effect method, and there is no
indication the court intended to endorse section 49.2.5 of the DLSE Manual.
Accordingly, we hold that state law does not bind us to accept the weighted
average method as the exclusive method for calculating the regular rate of pay for dual
rate employees for compensating overtime work. The trial court, which also decided that
it was not required to accept the weighted average method, concluded that Defendants did
not violate California law by using the rate-in-effect method.

C. Use of the Rate-in-effect Method Conferred Greater Benefit on
Defendants’ Dual Rate Employees Than the Weighted Average Method
1. Summary
Plaintiffs argue we should adopt the weighted average method because it is
supported by the DLSE enforcement policy, is consistent with federal regulation, and
better advances California public policy than the rate-in-effect method. Defendants argue
we should adopt the rate-in-effect method because the evidence at trial showed it is more
beneficial to employees and therefore better advances California public policy than the
weighted average method.

19
 The trial court considered the DLSE Manual and two DLSE opinion
6
letters. The court trenchantly criticized the letters as “contradictory, inconsistent,
inadequately reasoned” and the DLSE Manual as reflecting “no ‘expertise and special
competence’ with the problem at issue.” The court concluded, “the DLSE Manual does
not mandate application of the weighted average method in general, and certainly does
not support its application in the circumstances of this case.”
We do not address the DLSE opinion letters or decide which method an
employer must invariably use to calculate regular rate of pay for dual rate employees.
We conclude, based on the evidence presented in this case, Defendants did not violate the
law because, by using the rate-in-effect method for calculating regular rate of pay,
Defendants conferred a net benefit on dual rate employees greater than what they would
have received had Defendants used the weighted average method.

2. Whether Defendants’ Use of the Rate-in-effect Method Was Lawful
Depends on the Overall Effect on All Dual Rate Employees
To determine whether Defendants’ policy and practice of using the
rate-in-effect method underpays employees, we must assess the net effect of that policy
and practice on the entire group of dual rate employees during the relevant time period.
We agree with the trial court that the “time-rounding” cases illustrate and support this
point.
First, some background on time rounding: Federal regulation permits
employers to compute employee worktime by rounding “to the nearest 5 minutes, or to
the nearest one-tenth or quarter of an hour,” provided that the rounding system adopted
by the employer “is used in such a manner that it will not result, over a period of time, in

6
Dept. of Industrial Relations, DLSE, Chief Counsel H. Thomas Cadell, Jr., Opn. Letter
No 1992.04.27-1, Calculation of Regular Rate of Pay (Apr. 27, 1992)
; Dept. of Industrial Relations,
DLSE, Chief Counsel H. Thomas Cadell, Jr., Opn. Letter No. 1993.03.31, “On-Call”
Time-Beepers (Mar. 31, 1993) .

20
failure to compensate the employees properly for all the time they have actually worked.”
(29 C.F.R. § 785.48(b).) Almost all federal district courts interpreting that provision have
concluded that a time-rounding system is valid if it “average[s] out sufficiently” and have
rejected claims that minor discrepancies in one employee’s wage calculations establish
that the employee is entitled to assert a claim for underpayment of wages. (E.g., Alonzo
v. Maximus, Inc. (C.D.Cal. 2011) 832 F.Supp.2d 1122, 1126-1127; East v. Bullock’s, Inc.
(D.Ariz. 1998) 34 F.Supp.2d 1176, 1184.) The DLSE has adopted the federal regulation
for time rounding. (DLSE Manual, supra, § 47.3, p. 47-1; see AHMC Healthcare, Inc. v.
Superior Court (2018) 24 Cal.App.5th 1014, 1023, fn. 9 (AHMC).)
In See’s Candy Shops, Inc. v. Superior Court (2012) 210 Cal.App.4th 889,
901 to 902 (See’s I) the Court of Appeal addressed the issue whether the federal
time-rounding standard was permissible under California law. The employer in See’s I
enforced a policy of rounding time up or down to the nearest one tenth of an hour. (Id. at
p. 892.) The plaintiff employee contended this policy violated California law because it
denied employees full compensation for time worked. (Id. at pp. 893, 900.) The Court of
Appeal concluded a rounding policy is permissible under California law if the policy is
neutral on its face and as applied, and “its net effect is to permit employers to efficiently
calculate hours worked without imposing any burden on employees.” (Id. at p. 903,
italics added.)
In a subsequent decision, Silva v. See’s Candy Shops, Inc. (2016) 7
Cal.App.5th 235 (See’s II), the Court of Appeal affirmed summary judgment in favor of
the employer on the rounding issue. The court upheld the practice of rounding time up or
down to the nearest tenth of the hour because that practice was neutral and yielded a net
economic benefit for employees as a group—67 percent of the employees had either no
impact or a net gain under the rounding policy. (Id. at p. 242.) The court concluded the
employer had “met its burden to show the rounding policy is fair and neutral on its face

21
and is used in a manner that over a relevant time period will compensate the employees
for all the time they have actually worked.” (Id. at p. 252.)
In AHMC, supra, 24 Cal.App.5th at page 1014, the Court of Appeal
addressed the issue whether an employer’s use of a payroll system that automatically
rounds employee time up or down to the nearest quarter hour violated California law.
(Id. at p. 1016.) The plaintiffs, acting on behalf of themselves and a putative class,
alleged the rounding policy violated California law requiring employers to compensate
employees for time actually worked. (Id. at p. 1017.) The employer contended its time
records established that the rounding policy was lawful because it was facially neutral,
was applied fairly, and provided a net benefit to employees considered as a whole.
7
(AHMC, supra, at p. 1019.) The plaintiff employees contended the rounding policy was
unlawful because it resulted in undercompensation for a slight majority of employees:
According to plaintiffs, a rounding policy that results in any loss to any employee, no

7
The time records showed that, at one of the employer’s facilities, the rounding policy
added 9,476 hours to the pay of 49.3 percent of the workforce (709 employees) and left
1.2 percent of the workforce (17 employees) unaffected, while 49.5 percent of the
workforce (713 employees) lost time (a total of 8,097 hours). (AHMC, supra, 24
Cal.App.5th at p. 1018.) On a day-by-day analysis, the policy added time to 45.2 percent
of the employee shifts (4.96 minutes per day on average), reduced time from 43.3 percent
of employee shifts (4.82 minutes per employee shift on average), and had no effect on
11.6 percent of employee shifts. (Ibid.) Overall, the number of minutes added to
employee time by the rounding policy exceeded the number of minutes subtracted,
adding 1,378 hours to the employees’ total compensable time. (Ibid.)

Time records showed that at a second facility the rounding policy added time (17,464
hours) to the pay of 47.1 percent of the workforce (861 employees), and had no effect on
0.8 percent of the workforce (14 employees) while 52.1 percent of the workforce (953
employees) lost time (13,588 hours total). (AHMC, supra, 24 Cal.App.5th at p. 1018.)
On a day-by-day analysis, the policy added compensable time to 46.6 percent of the
employee shifts examined, reduced compensable time from 42.3 percent of the employee
shifts examined, and had no effect on 11 percent. (Ibid.) Overall, the rounding policy
added 3,875 hours to the employees’ total compensable time. Of the two named
plaintiffs, one lost a total of $118.41 over a four-year period and the other lost $63.70
over a ninth-month period. (Id. at p. 1019.)

22
matter how small the loss, and even if offset by some benefit to other employees, violates
California employment law. (Ibid.)
In determining whether the employer’s rounding policy was lawful, the
Court of Appeal sought guidance from the federal regulation allowing employers to
round employee time up or down, several federal district court decisions, and a recent
federal appellate court opinion, Corbin v. Time Warner Entertainment-
Advance/Newhouse Partnership (9th Cir. 2016) 821 F.3d 1069 (Corbin). (AHMC, supra,
24 Cal.App.5th at pp. 1020-1022.) In Corbin, the Ninth Circuit rejected the argument
that a rounding policy violates federal law if any one employee loses any amount of
compensation from application of policy. (Corbin, supra, at pp. 1076-1077.) Such an
argument, the Ninth Circuit concluded, would “read[] into the federal rounding regulation
an ‘individual employee’ requirement that does not exist.” (Id. at p. 1077.) The Ninth
Circuit held that the employer’s rounding policy was lawful, even though some
employees did not benefit from it, because the policy was facially neutral and neutral in
application. The policy was facially neutral because the employer rounded all employee
time up or down to the nearest quarter hour “without an eye towards whether the
employer or the employee is benefitting from the rounding.” (Id. at pp. 1078-1079.) The
policy was neutral in application because, as shown by the plaintiff’s own time records,
an employee might sometimes gain minutes and sometimes lose minutes. (Id. at
p. 1079.)
After considering Corbin, and other federal cases, the AHMC court
concluded the employer’s rounding policy was neutral on its face because it was applied
to all employees without regard to whether the employer or employee benefitted from the
rounding. (AHMC, supra, 24 Cal.App.5th at p. 1027.) The rounding policy was neutral
in application because at one facility a minority of employees lost time, and, although a
slight majority of employees at the second facility lost time, employees overall were
compensated for 3,875 more hours than were worked. (Ibid.) The AHMC court agreed

23
with Corbin opinion that “the regulation does not require that every employee gain or
break even over every pay period or set of pay periods analyzed; fluctuations from pay
period to pay period are to be expected under a neutral system.” (Ibid.) The AHMC
court also agreed with See’s I and See’s II that “a system is fair and neutral and does not
systematically undercompensate employees where it results in a net surplus of
compensated hours and a net economic benefit to employees viewed as a whole.” (Id. at
p. 1028.) Because the employees benefitted overall from the employer’s rounding policy,
the fact that “a bare majority lost a minimal amount of time” did not render the policy
unlawful. (Ibid.)
The rounding cases are significant to the present case in two important
respects. First, they establish that the lawfulness of Defendants’ dual rate overtime
policy must be determined by looking at the policy’s net effect on overall employee
compensation. For the policy to be lawful, it is not necessary for every employee in
every pay period to have benefited or broken even from the policy’s operation. Unless
the law or regulation in question has an individual employee standard, the policy is not
unlawful simply because one employee has lost any amount of compensation from it.
Second, the rounding cases establish that Defendant’s dual rate overtime
8
policy, if otherwise lawful, would not violate California employment law if the policy is
neutral on its face and neutral in application. A policy is neutral on its face if it applies to
all employees without regard to whether the employer or employee benefits from the
policy’s operation. (AHMC, supra, 24 Cal.App.5th at p. 1027.) A policy is neutral in
application if it does not systematically undercompensate employees, and “a system is
fair and neutral and does not systematically undercompensate employees where it results

8
The rate-in-effect method is not prohibited by statute, rule, regulation, or court
decision. The DLSE endorses the weighted average method, but statements in the DLSE
Manual are not binding. (See’s I, supra, 210 Cal.App.4th at p. 902.)

24
in a net surplus of compensated hours and a net economic benefit to employees viewed as
a whole.” (Id. at p. 1028.)
In the rounding cases, the employers were following a policy approved and
enforced by the DLSE and federal regulation, while in this case Defendants were
following a policy in conflict with DLSE policy and federal regulation. We do not
believe this distinction makes the rounding cases any less persuasive or relevant. Here,
we must decide whether Defendants’ use of the rate-in-effect method was lawful, just as
the courts in the rounding cases had to decide whether the employers’ rounding policies
were lawful. The DLSE Manual is not binding, and we have concluded that Alvarado
does not mandate use of the weighted average method. Thus, in both the present case and
in the rounding cases, the lawfulness of the employer’s policy must be based on the
soundness of the policy itself, and not by reference to the DSLE Manual or federal
regulation. And to make that determination, we must assess the net effect of the policy
on employees overall.

3. The Evidence at Trial Established that Defendants’ Dual Rate
Employees Received an Overall Net Benefit from the Rate-in-effect
Method
a). Defendants’ Policy Was Neutral on Its Face
Defendants’ policy of using the rate-in-effect method was neutral on its
face. Defendants applied the policy equally to all dual rate employees without regard to
whether the policy benefited Defendants or their employees. Dragas testified he made
the decision to use the rate-in-effect method based on his beliefs that he was following
industry standard and the rate-in-effect method would better compensate harder working
employees. During the final hours of the workday, some workers participated in a
management training program that was higher paid than other shifts; use of the rate-in-
effect method would ensure that such employees would get paid for all overtime at the
higher rate.

25
 b). Defendants’ Policy Was Neutral in Application
Defendants’ policy of using the rate-in-effect method was neutral in
application. The trial court found: “[T]he undisputed evidence here demonstrates that
the named Plaintiffs and PAGA group members financially benefitted from Defendants’
use of the [last] rate-in-effect method. Stated otherwise, there is no evidence that the
named Plaintiffs and PAGA group members were systematically undercompensated
because of the method used by Defendants to calculate overtime compensation in dual
rate workweeks.” Substantial evidence supports these findings.
i). Plaintiffs’ Expert
Plaintiffs’ expert, William Roberts, Ph.D., conducted a study of overtime
pay of dual rate employees and made findings on a pay-period basis. The only named
plaintiffs for the dual rate overtime subclass were Levanoff and Diaz. Roberts
determined that Levanoff had worked seven dual rate periods. Of those seven periods,
one pay period resulted in Levanoff receiving 98 cents less overtime pay than he would
have received using the weighted average method, and six pay periods resulted in a total
of $34.31 more overtime pay than under the weighted average method. Thus, in total,
Levanoff received $33.33 more overtime pay due to Defendants’ use of the rate-in-effect
method.
Roberts determined that plaintiff Diaz had worked seven dual rate pay
periods. Of these, three pay periods resulted in a total of 70 cents less overtime pay than
she would have received under the weighted average method, and four pay periods
resulted in a total of $18.62 more overtime pay than she would have received under the
weighted average method. Thus, in total, Diaz received $17.75 more overtime pay due to
Defendants use of the rate-in-effect method.
Roberts also conducted a class-wide study and made class-wide
conclusions. Roberts determined that of the 305 dual rate PAGA group members, 158
(51.8 percent) never worked a pay period in which the weighted average would have

26
resulted in more overtime pay. Of the 1,332 dual rate pay periods identified, in only 342
(25.7 percent) did employees receive less overtime pay by use of the rate-in-effect
method. In 990 of those pay periods (74.3 percent), the employees received more
overtime pay than they would have received under the weighted average method. Of the
157 employees who did experience a pay period in which the weighted average method
would have resulted in more overtime pay, the difference was $601.24 in total over the
nearly six years analyzed (September 2010 through January 2016). In those pay periods
in which the rate-in-effect method resulted in greater overtime pay, employees received
$2,666.98 more than they would have received using the weighted average method.
Thus, overall, the dual rate overtime PAGA group members were paid $2,065.74 more
because Defendants had used the rate-in-effect method instead of the weighted average
method.
ii). Defendants’ Expert
Defendants’ expert, Robert Crandall, also analyzed dual rate overtime
compensation for Levanoff and Diaz. Crandall determined that Levanoff had received
$30.99 and Diaz had received $3.88 more overtime pay due to Defendants’ use of the
rate-in-effect method than they would have received under the weighted average method.
Crandall also conducted an overtime compensation analysis for the entire
dual rate overtime PAGA group. Crandall used both a “total weekly earnings” analysis
and an analysis that isolated premium pay. Using the total weekly earnings analysis,
Crandall determined that of the 1,585 dual rate workweeks, employees received less
overtime pay by use of the rate-in-effect method in 723 weeks (45.62 percent), and
received more overtime pay in 862 weeks (54.38 percent). Of the 324 employees who
worked dual rate workweeks, 147 (45.4 percent) received less overtime pay while 177
(54.6 percent) received greater overtime pay under the rate-in-effect method. Of the 147
employees for whom the weighted average method would have resulted in more overtime
pay in a given workweek, the difference was $145.35 in total. In those pay periods in

27
which the rate-in-effect method resulted in greater overtime pay, employees received a
total of $341.14 more than they would have received under the weighted average method.
Overall, the PAGA group members were paid $195.79 more because Defendants used the
rate-in-effect method instead of the weighted average method.
Crandall’s overtime-only analysis yielded similar results. Crandall
determined that of the 1,585 dual rate workweeks, employees received, by use of the
rate-in-effect method, less overtime pay in 695 of those weeks (43.85 percent) and more
overtime pay in 890 of those weeks (56.15 percent). Of the 324 employees who worked
a dual rate workweek, 136 (42 percent) received less overtime pay and 188 (58 percent)
received greater overtime pay by use of the rate-in-effect method. Of the 136 employees
for whom the weighted average would have yielded more overtime pay in a given
workweek, the difference was $63.01, while in those pay periods in which the
rate-in-effect method resulted in greater overtime pay, employees received $214.75 more
than they would have received under the weighted average method. Overall, the dual rate
overtime PAGA group members were paid $151.74 more in overtime pay because
Defendants used the rate-in-effect method instead of the weighted average method.
iii). Analysis
Plaintiffs do not challenge this evidence. Instead, they point to the
instances in which the weighted average method would have yielded slightly greater
overtime pay for a particular employee in a particular pay period. Plaintiffs contend
those instances constitute violations of California law, even though Defendants’ dual rate
employees overall received a net benefit from use of the rate-in-effect method.
The courts in Corbin, supra, 821 F.3d at page 1077 and AHMC, supra, 24
Cal.App.5th at page 1027 rejected this “individual employee” standard for rounding
policies in favor of a standard based on facial neutrality and neutrality in practice. We
reject the individual employee standard for calculating the regular rate of pay for dual
rate employees in this case, not least because it would lead to an absurd result. Here,

28
Roberts found that 77 dual rate employees were underpaid a total of $460.36. In addition
to these unpaid wages, Plaintiffs claim interest and penalties resulting in a total class
award of a whopping $172,400.94. Yet Roberts himself found that the dual rate overtime
PAGA group members were paid $2,065.74 more overall because Defendants had used
the rate-in-effect method. Imposing penalties of any amount against Defendants under
these circumstances would be unjust.
In addition, an individual employee standard would create a bookkeeping
nightmare for employers by requiring them to calculate two separate figures for regular
rate of pay and to pay overtime hours to dual rate employees based on whichever
calculation yields the higher compensation. Moreover, sections 49.2.5 and 49.2.6 of the
DLSE Manual, like the time-rounding federal regulations, do not have any language
suggesting an individual employee standard is required. (See Corbin, supra, 821 F.3d at
p. 1077.)
The evidence presented at trial disproves Plaintiffs’ assertion, and the
assumption by the DLSE, that the weighted average method of the DLSE Manual always
better protects and benefits workers than does the rate-in-effect method. The rate-in-
effect method has been criticized as being more open to manipulation by employers, who
might assign dual rate employees to lower rate positions at the end of the workday. The
9
evidence presented in this case strongly refutes rather than supports that thesis. The
undisputed evidence established that Defendants adopted the rate-in-effect method
because employees in management training were working at higher hourly rates at the
end of the workday.

9
The trial court found, “the evidence belies any incentive for manipulation.” The
evidence at trial demonstrated: (1) the dual rate issue occurred in only 2.3 percent of the
70,232 workweeks analyzed, (2) the dual rate issue affected only about 300 of the more
than 1,600 PAGA group members, and (3) the difference in overtime pay between the
two methods accounted for 0.04 percent of the total compensation paid to dual rate
PAGA group members during all dual rate workweeks.

29
 4. Defendants’ Use of the Rate-in-effect Method Comports with California
Public Policy as Expressed in Alvarado
An “overarching interpretive principle” is that California’s employment
laws must be liberally construed to promote the protection and benefit of workers.
(Alvarado, supra, 4 Cal.5th at pp. 561-562.) “‘[I]n light of the remedial nature of the
legislative enactments authorizing the regulation of wages, hours and working conditions
for the protection and benefit of employees, the statutory provisions are to be liberally
construed with an eye to promoting such protection.’” (Brinker, supra, 53 Cal.4th at
pp. 1026-1027.) This principle of liberal construction does not, according to the evidence
presented at trial, support a requirement that employers use the weighted average method.
The evidence presented at the trial in this case would support a conclusion
that the rate-in-effect method, not the weighted average method, must be used by
employers because it better promotes the benefit of dual rate employees than does the
weighted average method. Any claims about the benefit to employees of the weighted
average method would be supposition because, to our knowledge, sections 49.2.5 and
49.2.6 of the DLSE Manual have never been vetted or made subject to scrutiny by
employers, employees, and the general public—except at trial in this case.
But we need not go so far as to decide between the two methods. The only
issue presented is whether Defendants violated California law, specifically, Labor Code
section 1194, by using the rate-in-effect method for calculating the regular rate of pay for
purposes of paying dual rate employees for overtime hours.

D. Conclusion
Defendants did not violate California employment law because the
rate-in-effect method, as demonstrated by the evidence, was neutral on its face and in
application. The rate-in-effect method yielded net greater overtime pay in total and for
more employees than would have the weighted average method and therefore resulted in
a net greater benefit overall for Defendants’ employees. If Defendants had used the

30
weighted average method instead of the rate-in-effect method, a majority of their dual
rate employees would have received less overtime pay and Defendants would have paid
less overtime pay to dual rate employees as a whole. Thus, even assuming the weighted
average method were required, Defendants would not have violated California law
because they paid Plaintiffs and the dual rate overtime PAGA group members more
overtime compensation overall than legally required.
Plaintiffs never presented the dual rate overtime claim to the LWDA and
never explicitly pleaded it in any of their complaints. The claim appears to have been an
afterthought, and meritless at that. We cannot help but agree with trial court that the dual
rate overtime claim did not vindicate the rights of Defendants’ employees, who, even
according to Plaintiffs’ expert, came out better from use of the rate-in-effect method.
Because we conclude Defendants did not violate California law by using
the rate-in-effect method, we need not address whether Plaintiffs agreed to that method or
whether the de minimis principle applies.

IV.

The Trial Court Did Not Err By Decertifying the Dual
Rate Overtime Subclass
Plaintiffs agreed that the trial court’s findings and conclusions from the
bench trial on the dual rate overtime PAGA claim would be carried forward into the jury
trial on the dual rate overtime subclass claim and bind the jury. Only the issue of
damages would be left for the jury to decide. The trial court’s conclusion that Defendants
did not violate California employment law by using the rate-in-effect method, a decision
we affirm, meant Defendants could not be liable for class damages. As Defendants were
not liable under the dual rate overtime claim, there were no issues for the jury to decide,
and the trial court did not err by granting Defendants’ motion to decertify the class.
Plaintiffs argue that allowing decertification of the dual rate overtime
subclass was “especially unwarranted” because it was certified in 2014, and since that

31
time the trial court has denied three motions for decertification. Class decertification
requires a change in circumstances, such as new law or newly discovered evidence, that
would make continued class treatment improper. (Williams v. Superior Court (2013) 221
Cal.App.4th 1353, 1360-1361.) The change in circumstances in this case was the trial on
the dual rate overtime PAGA claim and the trial court’s finding, based on the evidence at
that trial, that Defendants did not violate California employment law by using the
rate-in-effect method. Continued class treatment after the court’s ruling was improper
because there was no liability on which to award class damages.

DISPOSITION
The order decertifying the dual rate overtime subclass and the order
dismissing the PAGA claims are affirmed. Respondents to recover costs on appeal.

FYBEL, J.

WE CONCUR:

O’LEARY, P. J.

BEDSWORTH, J.

32