Executive Summary: On March 5, 2018, the California Supreme Court issued a ruling clarifying how employers must handle flat-sum bonuses (i.e., additional compensation that does not change depending on the number of hours worked by an employee) in the calculation of overtime. Under this ruling, an employer must calculate a non-exempt employee’s additional overtime by dividing the amount of the flat-sum bonus by the actual number of non-overtime hours worked by the employee; then multiplying that per-hour value by 1.5 (or 2, depending on the applicable multiplier to use) and by the number of overtime hours worked. The ruling clarifies an important technical aspect of overtime calculations and upends many employers’ previous understanding of what the law requires. Although this decision is limited to flat-sum bonuses and does not apply to other forms of non-hourly compensation, employers should promptly have their incentive/bonus compensation plans reviewed for compliance.