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,

v.

MATTHEW DRAGAS et al.,

 Defendants and Respondents.

 G058480, G058709

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

 O P I N I O N

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.

* * *
2

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. 
3

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, 
4

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 
5

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 

overtime PAGA claim.

1

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.)
6

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 
7

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. 
8

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 
9

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. 
10

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 
11

predominate.2 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.)
12

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 

time-barred. Those findings apply, however, only to that PAGA claim.3 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.
13

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 

Order No. 5)4require 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)).
14

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

<http://www.dir.ca.gov/dlse/opinions/1992-05-14.pdf>; 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 
15

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 
16

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 

without input from employers, employees, or the general public.5 (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.
17

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 
18

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
19

(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. 
20

The trial court considered the DLSE Manual and two DLSE opinion 

letters.6 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)

<http://www.dir.ca.gov/dlse/opinions/1992-04-27-1.pdf>; Dept. of Industrial Relations, 

DLSE, Chief Counsel H. Thomas Cadell, Jr., Opn. Letter No. 1993.03.31, “On-Call” 

Time-Beepers (Mar. 31, 1993) <http://www.dir.ca.gov/dlse/opinions/1993-03-31.pdf>.
21

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 
22

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. 

(AHMC, supra, at p. 1019.)7 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.)
23

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 EntertainmentAdvance/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 
24

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 

policy, if otherwise lawful,8would 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.)
25

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-ineffect method would ensure that such employees would get paid for all overtime at the 

higher rate. 
26

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 
27

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 
28

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, 
29

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-ineffect 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 

evidence presented in this case strongly refutes rather than supports that thesis.9 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.
30

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 
31

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 
32

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.