January 8, 2016.

Effective January 1, 2016, California labor law sets forth a statutory framework governing compensation schemes for so-called “piece-rate” workers – those paid a set amount on a per task basis, rather than by the hour. Numerous California court decisions and opinion letters from the Division of Labor Standards Enforcement have already made clear that any piece-rate pay system must adequately compensate workers for, among other things, nonproductive time, rest and recovery periods, travel time, and other de minimis tasks. These requirements have now been codified by the California legislature in Labor Code § 226.2.

Section 226.2 now expressly requires that employees “shall be compensated for . . . nonproductive time separate from any piece-rate compensation.” Labor Code § 226.2(a)(1). Section 226.2 defines “other nonproductive time” 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.” Labor Code § 226.2. The statute also makes clear that employees “shall be compensated for rest and recovery periods . . . separate from any piece-rate compensation.” Labor Code § 226.2(a)(1). Section 222.6 further requires that itemized wage statements separately state “[t]he total hours of compensable rest and recovery periods, the rate of compensation, and the gross wages paid for those periods during the pay period.” Labor Code § 226.2(a)(2)(A). The wage statements must also state “the total hours of other nonproductive time, . . . the rate of compensation, and the gross wages paid for that time during the pay period.”

Labor Code § 226.2(a)(2)(B). Further, the statute requires that the pay rate for rest periods must be “no less than the higher” of either the applicable minimum wage or “[a]n hourly rate determined by dividing the total compensation for the workweek [excluding rest period pay and overtime] by the total hours worked during the workweek.” Labor Code § 226.2(a)(3)(A). Section 226.2(a)(4) further states that nonproductive time must be compensated at an hourly rate not less than the minimum wage. The amount of nonproductive time may be determined either through actual records or the employer’s reasonable estimates. Id. § 226.2(a)(5)

Although Labor Code Section 226.2 was recently enacted, it codified existing California case law regarding piece-rate compensation schemes and their failure to compensate employees for all hours worked. See Gonzalez v. Downtown LA Motors, LP, 215 Cal. App. 4th 36 (2013); see also Vaquero v. Stoneledge Furniture, 9 Cal. App. 4th 98 (2017);Bluford v. Safeway Stores, Inc., 216 Cal. App. 4th 864, 871-72 (2013); Armenta v. Osmose, Inc., 135 Cal. App. 4th 314 (2005); Quezada v. Con-Way Freight, Inc., 2012 WL 2847609 (N.D. Cal. July 11, 2012); Ridgeway v. Wal-Mart Stores, 2015 WL 3451966 (N.D. Cal. May 28, 2015).

California law also makes clear that an employer must compensate its workers for any travel commuting time that is either undertaken at the employer’s direction or control, or that is excessive, or which involves the transportation of any goods, equipment, or materials for the company. See Morillion v. Royal Packing, 22 Cal. 4th 575 (2000); Rutti v. Lojack Corp., 596 F.3d 1046 (9th Cir. 2010); Slavkov v. Fast Water Heater Partners I, LP, Case No. 14-CV-04324-JST, 2015 WL 8482141, at *3 (N.D. Cal. Dec. 10, 2015); Armenta v. Osmose, Inc., 135 Cal. App. 4th 314, 322–24 (2005); see also DLSE 4/22/2003 Opinion Letter; DLSE 2/21/02 Opinion Letter.

Employers who utilize piece-rate compensation systems must take note and adjust their pay practices accordingly. If you are an employee, consider: Are you paid on a per task or per project basis? If so, does your work involve non-productive time for which you are not separately compensated? This might include time travelling to projects, in meetings, on calls, taking uniforms on and off, waiting time, etc. Does your employer track this time and account for it on your wage statements? If not, your pay scheme may not comply with California law, and your employer may be subject to significant liability for back pay and other penalties. In cases of large employers with sizeable workforces subject to these practices, class action treatment may be appropriate.

To find out more on any of these issues, please contact our offices: Wucetich & Korovilas LLP; (310) 335-2001; dimitri@wukolaw.com. This article is for educational use only, should not be considered legal advice, and in no way creates an attorney-client relationship between the firm and the reader.