by Terry O’Connor, ESQ
A recent article in Western Grower & Shipper magazine addressed a troubling case which may threaten the future of piece-rate compensation systems. In Downtown LA Motors, a California appellate court held that employers must separately compensate employees for “non-productive” activities even if the piece-rate earnings exceeded the minimum wage for all hours worked. This Court prohibited the averaging of piece rate compensation overall hours including time in which the employees are not “producing pieces,” violated California’s minimum wage laws.
A more recent case has extended the pay for “non-productive” time to rest periods. Section 12 of all California Wage Orders require 10 minute rest periods “for which there shall be no deduction in wages.” In Bluford v. Safeway (216 Cal.App.4th 864) the court stated, “…a piece-rate compensation formula that does not compensate separately for rest periods does not comply with California minimum wage law.”
Bluford involved truck drivers covered by a union contract with an activity-based compensation system including mileage driven, fixed rates for certain tasks and hourly rates for delays, breakdowns, etc.
The Safeway system is an example of a hybrid piece-rate system where certain duties are paid by piece rates and others are paid by the hour. Many employers who compensate by piece-rate will pay a separate hourly rate for meetings, breakdowns and the like. However, this observer has never encountered a hybrid piece-rate system which separately compensated for rest periods.
The Bluford court has added rest periods to the list of non-productive clock time worked which cannot be covered by merely stretching the piece-rate earnings to cover such periods. (Safeway filed for review by the Supreme Court on July 2.)
Legislative Attacks on Piece-Rate Systems
Piece-rate systems which reward proficiency and effort while offering minimum wage protections are beneficial to both employees and employers. However, worker advocates, some unions and their legislative surrogates have been trying to undermine piece-rate systems for some time. SB 435 would require employers to pay piece employees the “average piece-rate wage” for all rest periods. (This bill’s progress through the legislature has been temporarily suspended, however its supporters, including the UFW are likely to continue to push for its adoption.)
The Future of Piece-Rate Systems
Until the Supreme Court accepts the Downtown LA Motors and Bluford cases and rules definitively on the issue of compensation for “non-productive” tasks/time, employers should carefully review their piece-rate systems. Waiting time, meetings, warm up periods, time spent donning protective gear should all be separately compensated with an hourly rate which meets the minimum wage. Such periods should be noted on pay employee paystubs.
Plaintiffs’ attorneys invariably ask to see a disgruntled employee’s paystub to determine if there are any compensable violations of the Labor Code. One can expect the plaintiffs’ attorneys, looking for wage claims for ag employees will be familiar with the Downtown LA Motors and Bluford cases. Employers who document separate pay for meetings and other non-productive time will not be “low hanging fruit” for the plaintiffs’ attorneys specializing in wage claims.
Possible Solutions for Non-Productive Time Issue
Western Growers General Counsel Jason Resnick and I presented much of the foregoing material in a June 27th Piece-Rate Webinar. There was a discussion of possible solutions to the problem of accounting for piece-rate employees’ “non-productive time.”
One solution is to convert from a pure piece-rate system to a “production bonus” system. Under such a plan, the employer would pay an hourly rate at or above the minimum wage for all hours worked. In addition, the employee or group would get a production bonus, a fixed amount, for each unit produced: box packed, mile driven or pound produced. This production bonus would be far less than the existing piece-rate because the hourly rate would now become the largest component of compensation.
Admittedly it would be difficult to convince piece-rate workers to adopt such a system.
A second solution would be to separately compensate for all non-productive time including rest periods, exercise time, meetings, donning and doffing required safety gear, standby time and company meetings. The foreman or supervisor would track such time for employees and it would appear as “miscellaneous hours worked” on the employee’s paystub. There would be some adjustment of the piece-rates to reflect the extra hourly amounts now compensating for non-productive time which had been covered by the piece-rate.
This second solution would require the employer to promulgate a written policy and have employees acknowledge receipt in writing. Coincidentally, while this article was being written, several of the best legal minds in California agriculture collectively drafted a policy on “Non-Productive” work time. Rob Roy, from Ventura County Ag Association and Carl Borden of the Farm Bureau were the main authors with input from this author and Jason Resnick of Western Growers. A copy of this policy can be obtained from Rob at [email protected]; from the author at [email protected] or in the WG Personnel Procedures Manual. (Employers should review such policies with their own legal counsel to ensure the appropriateness for their own particular situation.)
Lawsuits over the “non-productive” time of piece-rate workers are on the increase and agricultural employers are certain to be targeted. While we have not heard the final word on whether rest periods require separate compensation, it is likely that the Legislature will revisit SB 435 particularly if the Supreme Court overrules Bluford.
This article is intended to address topics of general interest and should not be construed as legal advice.
© 2013 Noland, Hamerly, Etienne & Hoss