What Is A Piece-Rate Compensation System?
A piece-rate compensation system pays employees a set amount for each unit of work completed. For example, in a manufacturing setting, an employee that receives a set amount for each item the employee produces, regardless of how fast or slow the employee works. Accordingly, under a piece-rate compensation system, the employer only pays for work completed by employees.
New CA Requirements For Piece-Rate Compensation
Governor Jerry Brown signed Assembly Bill 1513 ("AB 1513") into law on October 10, 2015. This law makes several important changes to California's requirements for piece-rate compensation systems under new Labor Code section 226.2.
Rest and Recovery Breaks
Under AB 1513, employees who are paid under a piece-rate compensation system must be separately compensated for time to take rest and recovery breaks. The employer must separately pay for such rest and recovery breaks at an hourly rate of no less than the greater of either (1) the applicable minimum wage, or (2) the employee's average hourly wage for all time worked (exclusive of break time) during the relevant workweek.
"Other Nonproductive Time"
Under AB 1513, employees who are paid under a piece-rate compensation system must be separately compensated for "other nonproductive time," defined as the "time under the employer's control" that is not "directly related to the activity" being compensated on a piece-rate basis.
Employers may try to avoid the additional compensation requirements of AB 1513 by broadly characterizing the "activity" that employees are compensated for under the piece-rate compensation system, and claiming that all of the work performed by their employees is "directly related" to the "activity" being compensated on a piece-rate basis.
Employees compensated on a piece-rate basis may challenge the definition of the "activity" for which they are compensated under the piece-rate system. Employees may also challenge whether certain tasks that they perform are "directly related" to the "activity" for which they are compensated.
Employers must compensate such "other nonproduction time" at an hourly rate no less than the applicable minimum wage. The amount of "other nonproductive time" to be paid shall be determined by either the employer's actual records or by the employer's "reasonable estimate."
Updated Wage Statement Information Required
Under AB 1513, employees' wage statements will have to include the following information, in addition to the information already required under Labor Code section 226(a):
- The total hours of compensable rest and recovery periods, the rate of compensation for those periods, and the gross wages paid for those periods during the pay period.
- The total hours of other nonproductive time, the rate of compensation for that time, and the gross wages paid for that time during the pay period.
Are You Paid Under A Piece-Rate Compensation System?
If your employer pays you under a piece-rate compensation system and you believe that you are entitled to unpaid wages, Contact Sani Law today to schedule a free consultation. We will aggressively pursue compensation from employers that fail to follow the law.