New piece-rate compensation legislation goes into effect January 1, 2016.
The piece-rate compensation system is common in industries such as agriculture, manufacturing, automotive repair, truck driving, salons and spas, among others. For example, a factory worker might be paid per item made on the assembly line.
Over the past several years, California courts have been addressing the issue of compensating piece-rate workers for non-piece rate time, such as rest breaks or other non-productive time that is not being spent producing a product or completing a task.
California’s Legislature stepped in, passing a new law effective January 1, 2016, which specifically addresses the issue of compensating piece-rate workers for non-piece rate time and expands on existing court decisions. The Legislature passed AB 1513, adding section 226.2 to the Labor Code.
The law requires employers to pay piece rate workers for rest and recovery periods and other non-productive time at specified minimum hourly rates. This compensation must be separate from the piece rate compensation. The law includes a definition of “other non-productive time.”
AB 1513 also mandates that specific information must now be included on a piece-rate employee’s itemized wage statement (pay stub). For instance, the total hours of compensable rest and recovery periods must now be included on the pay stub.
The new law contains a “safe harbor” provision for employers who, in the past, may not have properly paid piece-rate workers for rest and recovery periods or non-productive time and face liability. An employer will be required to fully compensate employees for any amounts not properly paid and meet other statutory requirements. Employers who want to take advantage of the safe harbor provision will need to meet the statutory requirements by December 15, 2016, including notifying the Department of Industrial Relations (DIR) by July 1, 2016, of their intent to make back payments to current and former employees.
The DIR recently created a page dedicated to the new piece-rate legislation, which includes a fact sheet and answers to frequently asked questions.
The DIR also created a form for employers to use to notify the department of intent to make back payments.
If your business uses piece-rate workers, you will want to closely review this new law and make necessary changes to payroll practices. Employers concerned about past compensation of piece-rate workers should consult legal counsel regarding the availability of this defense.
Gail Cecchettini Whaley, CalChamber Employment Law Counsel/Content
For a full discussion, members can read more in the recent HRCE article, Got Piece-Rate Employees? Not a member? See how HRCalifornia can help you.
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