As the end of 2015 nears, California employers should ensure their piece-rate compensation practices comply with changes to the California Labor Code that go into effect at the start of the new year.
Piece Rate Compensation
Assembly Bill 1513 created the new California Labor Code Section 226.2, which requires employers to pay employees who are compensated on a piece-rate basis for rest and recovery periods and “other nonproductive time” separately from any piece-rate compensation. Employers will be required to compensate employees for rest and recovery periods and “other nonproductive time” according to the following:
- Rest and Recovery Periods: No less than the higher of minimum wage or an average hourly rate, which is determined by dividing the total compensation for the workweek (not taking into consideration compensation for rest and recovery periods or any premium compensation for overtime) by the total hours worked during the workweek (not including rest and recovery periods).
- Other Nonproductive Time (defined as time under the employer's control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis): No less than the minimum wage. However, an employer who pays an hourly rate of at least the applicable minimum wage for all hours worked, in addition to any piece-rate compensation, will be considered compliant with Section 226.2.
In addition to the nine wage statement requirements set forth in Labor Code section 226(a), the new law requires that wage statements issued to piece-rate employees separately list the total hours of compensable rest and recovery periods, the rate of compensation, and the gross wages paid for rest and recovery periods during the pay period. The wage statement must also separately list the total hours of other non-productive time, the rate of compensation, and the gross wages paid for the other non-productive time during the pay period.
Safe Harbor Provision
A safe harbor provision in the law provides that an employer may assert an affirmative defense to any claim for “recovery of wages, damages, liquidated damages, statutory penalties, or civil penalties” based solely on the employer's failure to timely pay the employee for rest and recovery periods and other non-productive time for any time period prior to December 15, 2015. This safe harbor only applies if, by December 15, 2016, the employer does all of the following:
- Makes payment to each of its employees for previously uncompensated or under compensated rest and recovery periods and other nonproductive time for the time period from July 1, 2012 to December 31, 2015, using either of the following calculations:
- Pay the actual sums due with accrued interest;
- Pay employees an amount equal to 4% of their gross earnings for each pay period that the employee conducted work on a piece-rate basis from July 1, 2012 to December 31, 2015, less any amounts already paid to the employee for rest and recovery periods and other non-productive time during the same pay period at issue but the credit taken cannot exceed 1 percent of the employee's gross earnings during the pay period at issue.
- The employer must notify the Department of Industrial Relations (“DIR”) by July 1, 2016, that it has elected to make such payments to its current and former employers. The statute specifies exactly what information is to be included and where it is to be sent. The names of employers who have made this election will be posted on the DIR's website until March 31, 2017.
- Payments to employees must be made as soon as “reasonably feasible” but must be completed by December 15, 2016.
- Detailed statements regarding the payments must be provided to employees, including, a statement as to how the amount was determined and which calculation method was used (actual sums versus 4% gross earnings) and providing a list or spreadsheet that lists each pay period that is included in the payment, the total hours of rest and recovery periods and other non-productive time of the employee, the rates of compensation for that time, and the gross wages paid for each pay period.
The safe harbor provision does not apply to claims that employees were not advised of their right to take rest or recovery periods, or that such periods were not made available or were discouraged. The safe harbor also does not apply to claims asserted for non-compensation or under compensation of rest or recovery periods and other non-productive time if those claims were asserted in a lawsuit prior to March 1, 2014, or a lawsuit filed prior to March 1, 2014 in which the employee sought to add a claim related to rest and recovery periods or other nonproductive time prior to July 1, 2015. It also, likewise, does not apply to any claims that accrue after January 1, 2016.
If you have questions about piece-rate compensation, or the California Labor Code, don't hesitate to contact leading California employment lawyers from Kingsley & Kingsley to take advantage of a free initial consultation. To discuss your situation call us toll-free at (888) 500-8469 or click here to contact us regarding your case.