Haulers and Other Employers May Not Pay Purely by the Mile or Other Production

“Piece work” pay or “piece rate” is compensation for an employee’s unit of production.  Until two key 2013 California Supreme Court decisions (Gonzales v. Downtown L.A. Motors and Bluford v. Safeway), this arrangement had long-worked to benefit workers and management in many industries.  Trucking companies commonly paid drivers by the mile or by the delivery, auto repair shops paid mechanics by the task accomplished, and agricultural enterprises paid field workers by the bin or other unit measure.

A production-based system enables business to set workers’ pay rates proportional to the enterprise’s overall income generated from that production while employees, where paid well above industry norms for their efforts, tend to be more invested in company success.

Production-Based Piece Pay Hits a Wall:  However, the Gonzales and Bluforddecisions found that pure production structures violated California’s required minimum wage payment “for every hour worked.” Piece rate alone by definition did not pay for the daily hours an employee spends on paid rest breaks or on performance of other required tasks (so-called “non-productive” compensable time, e.g., staff meeting, preparation or clean-up time).

From the many years whole industries had appropriately paid by the piece up to that time, these two decisions created the crushing prospect of retroactive wage liability going back as far as 2009.  Seeking to restore balance, the California Legislature enacted Labor Code 226.2, effective January 1, 2016.  This section:

● provided employers a way to protect against such claims by a specific “safe harbor” formula of back pay to December 31, 2015;

● required piece rate-paying businesses from January 1, 2016 to pay at least the applicable minimum wage (state or higher local standard) for each and every hour worked, whether that time is for production, other tasks or rest breaks; and

● required such businesses to also pay a specially calculated premium for every rest or recovery period to which such employee is entitled for each day of labor.

Production, Piece Pay is Still Possible with Good Planning, Policy: The 2016 law does not outlaw piece pay.  It only requires that employers structure such plan carefully to comply with the minimum wage for “every hour worked” concept. Thus, a company intent on maintaining the incentives to high production may construct “hybrid” production-based plans which:

● start with a foundation of guaranteed minimum wage for each hour worked;

● provide an additional piece rate calculation on top of that foundation;

● pay the specially calculated premium for every daily rest or recovery period to which an employee is entitled;  and

● comply with all section 226.2 rules on additional paystub entries for piece work compensation systems.

See also:

• California Piece Rate Law: No Time to Relax on Rest-Recovery Premium Pay(September 30, 2016)
• Navigating Piece Work Pay in California – Employers Urgently Must Revise Wage Systems, Including Possible Hourly-Plus-Piece Hybrid Plan (August 12, 2016)

For more information on such matters, please contact Tim Bowles, Cindy Bamforth orHelena Kobrin.

Tim Bowles
April 23, 2021