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12 Things You Want to Know About Piece Rate Compensation in California

Q1. What is the when the law goes into effect?

A. According to the operation of law, the date when AB 1513 was gone into effect is 1st January, 2016.

Q2. What is the purpose of AB 1513?

A. Section 226.2 is added by the AB 1513 to California Labor Laws which is applied for the employees who are provided piece rate compensation for any task performed within a pay-period. Many employment attorneys will give free consultation on AB 1513 if you call them.

Basically, the section 226.2 of labor code does the following 2 things:
1. The requirements of wage statement and compensation for piece rate employees for the rest or recovery period including any non-productive period are established starting for the date when statute went effective. If you’re a business owner, do not try to understand the nuances of section 226.2 without talking to a business lawyer.

2. An affirmative defense to negligence filed by personal injury lawyers some specific employees under specific conditions to defend the claim, the cause of any action due which damages are resulted or legal penalty due to the allegation that employer failed to pay the compensation for the rest or recovery period including any non-production period before the date when statute went effective.

Q3. What is meant by piece rate compensation?

A. Section 226.2 of labor code has not changed the current definition of piece rate compensation.

Following explanations are provided in the current manual of division of labor standards enforcement :

Section 2.5.1 Piece Rate/Piece Work:

The definition of piece rate as per the dictionary of American Heritage is given as; “Work paid for on the basis of number of the units turned out.” Hence, it can be written that the piece rate must be according to a fix rate paid for the completion of some specific task or complete the manufacturing of specific number of items/goods.

Section 2.5.2 Examples of plans of piece rate:

Following are some examples of the piece rate:

1. Payment to an automotive mechanic is done on the book rate according to the Chilton Manual.

2. Payment to a carpenter is made according to the linear foot used on the frame.

3. Payments to a technician is made according to the number of telephones that are installed by him.

4. Number of the procedures performed by the nurse determines the payment made to her/him.

5. The number of widgets completed specifies the payment made to a factory worker.

6. The area over which carpet is laid define how much will be paid to the carpet layer.

Section 2.5.3 Plan for a piece rate compensation:

This plan says that their may be a group consisting a number of people who will share the payment paid for any task completion or product manufacturing.

Section Plan for piece rate and commission:

This plan says that there may be some additional payment to the salary or hourly payment that is termed as commission. This compensation may include commission along with the normal salary.

Q4. Do the employees working on commission basis fall under the law?

A. No, the employees who work according to commission plans of payment do not fall under this law because the section 226.2 of labor code says that this law is valid only for the employees who are paid according to piece rate plan for their work performed during the pay period.

Here it is to be noted that the nature of compensation is determinative not the label. Another point to be noted that the section 226.2 of labor code is applicable only on the employees who are compensated according to piece rate plan, but a court in declared that the commission-based employees also fall under this law including the right to be paid for any required rest leave during pay period. Manual of Division of labor standards enforcement can be consulted for more information.

Q5. Do the requirements for overtime compensation are changed by the statute?

A. Section 226.2 of labor code clearly states that the minimum wage and requirements for overtime compensation must not be changed nor the obligation to pay the employee for all the time that he/she worked under some local ordinance or statute.

It means if the piece rate employee works overtime in any working week, the compensation for the overtime will be determined according to the existing rules.
Q6. How the average rate for working hour is calculated for rest and recovery time durations?

The law states that the normal hourly-rate will be "calculated by the division of total payment for the whole working week, without considering the payment for rest and recovery time or any overtime payment, by the total number of working hours during that working week, excluding the rest and recovery time durations.

The statute discussed in the above paragraph is referring to the total compensation for the working week. The formula is same as the regular overtime compensation rate is calculated by the employees. The manual of Division of labor standards enforcement includes the information about the types of compensation in a working week that are included and not included for the above discussed purpose.

Q7. Is there anything in the section 226.2 of labor code that employer needs to keep a track of the number of minutes that are taken by the employee for the rest or recovery period?

A. No. It is stated according to the section 226.2 of labor code under subdivision 2a that the wages are paid for the total hours of rest and recovery periods that are compensable and the rate of compensation is fixed.

If the employer authorizes or permits two ten-minutes breaks for rest during the working shift of the employee, the compensable periods are those which are authorized and permitted by the employer. So, this the time that is compensable and must be considered/written in the statement for wage regardless of the fact that he took small or longer breaks than the time that was authorized to be compensated (i.e. 8 minutes out of ten that is smaller than the authorized or 13 minutes when the authorized time is 10 minutes.)

In the same way, the employer will determine the recovery period that is a period which is afforded to prevent any harm to the employee e.g. time taken to cool down to prevent the heat injury to the employee. This all depends on the situation so it must be determined case to case bases and then compensated to the employee according and must be added in the wage statement of the employee.

Q8. The rules for the employers who are paying semi monthly are different, why is it so?

A. The requirements for the compensation for the recovery and rest time durations are actually same for all of the employers involving those too whose are paying on the basis of semimonthly. However, since there is a possibility that the pay period may end during the mid of a working week so in such a situation it is not possible to calculate the exact average for hourly rate of compensation so in such a scenario, the employer can pay the compensation to the employee at the minimum wage rate in the first pay period and then pay the additional compensation in the next pay period to correct the previous compensation rate.

This method is exactly according to the existing laws and rules in the section 204 of labor code for the employer paying semimonthly. For example, all the additional compensations than the normal wage rate must be paid to the employee not later than the paying day of next payroll duration.

Q9. What is meant by other non-productive periods?

According to the section 226.2 of labor code, the other non-productive periods are defined as the time durations that are under the control of employer excluding the rest and recovery time durations which are not in direct relation to the activities which are compensated according to the piece rate plan.

These other non-productive time durations depend on the situation and may vary according to the work nature or activity that is compensated according to piece rate plan.

Q10. Can the deadline for the notice provision to the department of industrial relations be extended?

If the law states that the deadline is 1st July 2016 while the court orders to extend the deadline temporarily to 28th July 2016 but denies the request for any further delaying, then the employer must have to submit the notice before 28th July, 2016 otherwise he/she will not be able to do so legally.

Q11. How the employee can claim those funds which were transferred to unpaid wage fund?

According to the law Ab 1513, the payments of the employees who are eligible for back pay can be turned over to the unpaid wage fund of commissioner and if the employee wants to claim those funds, he/she can fill the request payment form and mail it to the given address and can personally deliver it to any office of labor commissioner in the near locality.

Q12. If the employer breaks the payment requirements of piece rate, what can an employee do in this case?

If an employee is not being paid his/her compensation according to the section 226.2 of labor code or any other law of hourly wage payment, he/she has the right to come up with a legal claim the compensation charges due to the employer and any damages or penalties to the employer. Such a claim can be brought up in following three ways,

1. Directly through the labor commissioner

2. Through some alternative dispute resolving committee if any such committee is allowed or required according to the employment agreement

3. Through putting up lawsuit in the court

Those who are going for the first option among the three can file a claim of wage to the wage claim adjudication unit of labor commissioner. They can also file a violation report with the bureau of field enforcement of labor commissioner where individual cases are not entertained but they can investigate the employer. If you need more information about this you can find it in the local office or website of the labor commissioner.

Vaquero v. Stoneledge Furniture LLC, 9 Cal.App.5th 98 (2017)

Labor Commissioner's website

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