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What is A California Piece Rate Class Action Lawsuit?

The more things change the more they stay the same - California Wage Law - Piece rate 

I've been doing California piece rate cases for a long time. In this article, I get down into the details on California piece rate law. Perhaps, I should start at the beginning. Paying workers by piece rate is not illegal under California law. Where most employers have screwed up with their piece rate pay structures is that they make two critical mistakes. First, they don't separately pay for all hours worked. Second, they don't provided a paid 10 minute rest breaks. 

California Labor Code Section 226.2 - the California piece rate Labor Code Section 

For years, I had to win these piece rat cases with case law. That all changed when California Labor Code Section 226.2 was passed.  I was the only Class Action wage lawyer to testify at the California Legislature Hearing for Labor Code Section 226.2.  This was literally a "game-changer" in some respects. In other respects 226.2 merely codified (read: stated) what the courts had been saying for years. Unlike many were claiming at the time - California law didn't change with the Gonzalez v. Downtown LA Motors case. But what 226.2 did was end all of the cheesy B.S. arguments employers made when they were caught red-handed taking workers wages by using illegal piece rate pay structures. 

Bill Turley testifying at the California State Senate Hearing on California Labor Code Section 226.2 

 

Bill Turley was the only wage class action lawyer asked to testify at the California legislature Hearings on California Labor Code Section 226.2

- California's piece rate Labor Code Section

 

Bill Turley is known for Being a Straight Shooter

This is why Bill Turley is continually asked to go to Sacramento in order to work on wage theft issues with the California State Assembly, California State Senate, the State of California Labor Commissioner’s Office, and the California Attorney General’s office. Bill is known for telling it like it is. They know he will tell it the way it is.

Bill doesn't work for any of these government organizations. He only works for you. But all of these government organization turn to Bill when they need advice on unpaid wages law.

Bill testyfing at California Assembly - PAGA - what you should do when you aren't paid your wages

California “Piece Rate” Laws

Most non-exempt employees are paid by the hour for their work. California’s Wage Orders permit non-exempt employees also to be paid on a piece rate basis.

The piece rate system is a system of wage payment in which workers are paid on the basis of the units of output produced. Piece rate system does not consider the time spent by the workers. Piece rate system is the method of compensating workers according to the number of unit produced or job completed. In some industries, piece rate compensation plans are fairly common. For example, mechanics and drivers often are paid by piece rate compensation plans.

Examples of piece rate pay structures

Mechanics that get paid by the job

Mechanics that are paid on a flag rate system or a book rate system

Drivers that are paid by the miles they drive

Garment workers that are paid by each garment that they sew/ produce 

Field workers that are paid by the bushel of fruit that they pick 

Transcribers that paid for each document that they transcribe

Loaders that are paid by each package or box that they load or paid the weight of what they load 

Construction workers that are paid by each unit that they build or construct - for example for each solar unit they install 

House keepers that are paid for each room that they clean

Call center workers that are paid for each call they take

 

Armenta- utility workers weren’t paid for the time spent driving to job sites and doing paper work - the court held that Califoria doesn’t use the federal approach of averaging hours worked

 
In Armenta, workers who maintained utility poles in the field were paid an hourly wage, which was above the minimum wage, but the employer refused to pay an hourly wage for time spent driving to the job sites or processing paper work. Armenta v. Osmose, Inc. 135 Cal.App.4th 314, 317-319 (2005).
The employer argued that this practice did not violate the minimum wage requirement for the hours that were uncompensated because “when an employer pays a higher hourly rate, … it should be entitled to divide the total number of hours worked into the amount the employee was paid to arrive at an average hourly wage and then determine whether the employee's compensation complied with the minimum wage law.” 
This was the approach followed by federal courts applying the federal Fair Labor Standards Act of 1938 FLSA; 29 U.S.C. § 201 et seq.; Armenta v. Osmose, Inc. 135 Cal.App.4th 314, 321-322 (2005).
 
The court in Armenta interpreted Wage Order 4 in light of its language and the surrounding statutory provisions, and the Armenta court concluded that:
  “the FLSA model of averaging all hours worked ‘in any work week’ to compute an employer's minimum wage obligation under California law is inappropriate. The minimum wage standard applies to each hour worked by respondents for which they were not paid. The trial court, therefore, correctly determined that appellant violated [the minimum wage requirement] by failing or refusing to pay for driving time and time spent by foremen processing paperwork.”
 Armenta v. Osmose, Inc. 135 Cal.App.4th 314, 324 (2005).

Accordingly, under Armenta, when using an hourly based compensation system, an employer is required to pay at least the minimum wage for each hour worked and may not meet that requirement by showing that the employee was effectively paid more than the minimum wage for all time on the job by dividing the  amount of the employee's total compensation for the pay period by the total hours worked, even though some time was not separately compensated by an hourly wage.
 
The rule established by Armenta—that employees must be separately compensated at minimum wage or above for all time worked—was subsequently applied by California courts to “piece-rate” compensation programs, in which employees do not receive an hourly wage but are paid based on the tasks they perform.
 

The irony of the Armenta case


The Armenta case is cited in every California piece rate case that I can recall. However, the Armenta case was not a piece rate case. Instead, the workers in Armenta were paid on a hourly basis.  But the important part is that the workers were not getting paid for all time worked. 


Mechanics paid on flat rate - per flag hour must be paid for all time worked (Gonzalez vs Downtown LA Motors)

 
California law does not allow an employer to avoid paying its employees for all hours worked by averaging total compensation over total hours worked in a given pay period.  Gonzalez v. Downtown LA Motors, LP, 215 Cal. App. 4th 36, 40 (2013).  The Gonzalez court followed the decision in Armenta.
 
In Gonzalez, automobile service technicians were paid on a piece-rate basis for their work. Specifically, technicians were “paid a flat rate ranging from $17 to $32, depending on the technician's experience, for each ‘flag hour’ a technician accrues.”  
 
Flag hours were assigned to every task that a technician performed and were intended to correspond to the actual amount of time a technician would need to perform the task. A technician who completed a repair task accrued the number of flag hours assigned to that task, regardless of how long the technician actually took to complete the task. A technician's pay for each 80-hour period was based on the number of flag hours accrued during that pay period multiplied by the technician's applicable flat rate. 
 
The technicians accrued no flag hours for performing nonrepair tasks, such as cleaning, obtaining parts and participating in training.  Thus, the employees were not directly compensated for nonrepair time.
 
In an attempt to comply with minimum wage requirements, the employer kept track of all the time a technician spent at the worksite, whether or not the technician was working on a repair order, and it divided the employee's total earnings over the pay period by the total hours worked to ensure that the employee's effective hourly rate was at least at the minimum wage. Gonzalez v. Downtown LA Motors, LP, 215 Cal. App. 4th 36, 41-42 (2013).
 
If the effective hourly rate was less than the minimum wage, the employer supplemented the technician's pay to reach an effective average hourly rate that equaled the minimum wage.  The court in Gonzalez concluded that under Wage Order 4 an “employer's method of averaging employees' hours worked in a given pay period in order to compute its minimum wage obligations violated the minimum wage law.” Gonzalez v. Downtown LA Motors, LP, 215 Cal. App. 4th 36, 41-46 (2013).
 
Technicians “were entitled to separate hourly compensation for time spent waiting for repair work or performing other nonrepair  tasks directed by the employer during their workshifts.” Gonzalez v. Downtown LA Motors, LP, 215 Cal. App. 4th 36, 41-42 (2013).


Piece rate and rest periods


Armenta's holding also has been extended to the issue of whether an employer paying on a piece-rate basis must separately compensate employees for rest periods. In Bluford, truck drivers were compensated based on the number of miles driven and other variables, but “none of these components directly compensated for rest periods.” Bluford v. Safeway Inc. (2013) 216 Cal.App.4th 864, 872.


The court in Bluford held that “under the rule of Armenta … rest periods must be separately compensated in a piece-rate system. … [¶] Thus, … a piece-rate compensation formula that does not compensate separately for rest periods does not comply with  California minimum wage law.”  Bluford v. Safeway Inc. (2013) 216 Cal.App.4th 864, 872.

Meaning, that when you have a piece rate system, you must also provide separate paid 10 minute rest breaks. 


Labor Code Section 226.2


Effective January 1, 2016, the California Legislature enacted Labor Code section 226.2, which codified the holdings of Gonzalez and Bluford, providing for separate payment for nonproductive work time and for rest periods when employees are compensated on a piece-rate  basis.


Section 226.2 mandates that piece-rate employees receive compensation for all rest/NP time that is “separate from any piece-rate compensation.” California Labor Code Section 226.2(a)(1). Such employees are assured under an alternative formula in subdivision (a) that their compensation for rest and recovery time will be no less than minimum wage; in some instances the compensation may be greater than minimum wage.  California Labor Code Section 226.2(a)(3)(A) and (B).


And an employer must compensate its piece-rate employees for nonproductive time at no less than the applicable minimum wage.  California Labor Code Section 226.2(a)(4).


I know California Labor Code Section 226.2 very well, because I testified on the bill in the California Legislature.

Driver Piece Rate Compensation Plans

For example, some truck delivery companies use a formula to pay their drivers. Here are common components of piece rate systems for delivery drivers:

  • The number of cases of product delivered on a route,
  • The number of miles driven on a route, and
  • The number of delivery stops made on a route.

It is my understanding that I represent more Teamsters and drivers than any lawyer in California. Many of these driver class action cases have been based upon trucking companies not separately paying drivers for all time worked and for not providing paid rest breaks. 

 

Mechanic Piece Rate Compensation Plans

Many companies pay mechanics under piece rate compensation plans. Under one California company’s piece-rate system, mechanics are paid a flat rate ranging from $17 to $32, depending on the technician's experience, for each “flag hour” a technician accrues. Flag hours are assigned by the company to every task that a technician performs on a car and are intended to correspond to the actual amount of time a mechanic would need to perform the task. A mechanic who completes a repair task accrues the number of flag hours that the company assigns to that task, regardless of how long the mechanic actually took to complete it. Mechanics accrue flag hours only when working on a repair order.

The company calculates its mechanics’ pay for an 80-hour pay period by multiplying flag hours accrued during that pay period by the mechanic's applicable flat rate. For example, a mechanic with a flat rate of $26 who accrued 150 flag hours in a pay period would earn 150 x $26 or $3,900.

 

How Piece Rate Compensation Systems Are Illegal Under California Law

Under California piece rate compensation laws, your employer must compensate you for all the time you work—not just for piece rate items. For example, truck drivers must be compensated for pre-trips and post-trips. Mechanics must be compensated for cleaning up and having to wait at work, waiting for the next car to repair. Or for loaders, while doing paperwork.

Your next step

If you suspect (or know) that you haven't been paid all of the wages that you are owed, you need to immediately contact a seasoned California wage lawyer about your unpaid wages.

 

Call (619) 234-2833 or fill out the contact form on this webpage. 

 


Not all lawyers are alike


Lawyers have far different expertise and experience in handling different legal matters. We are only telling you all of this so you know that Bill Turley has the experience, resources and skill to handle unpaid wages class action cases and Private Attorney General Act cases.  
We are not telling you all this to brag, but to let you know that Bill has the skill and resources needed to prevail in class action lawsuits and/or PAGA lawsuits.
All lawyers are not alike. Putting aside all of the awards and accolades - Bill is also known for being blunt and honest. 


“I give it to you straight. No sugar added.  No lawyer talk, no double talk. Just old fashioned, unsweetened truth.” - Bill Turley


Bill Turley specializes in wage and hour class action cases. There are few, if any, lawyers in California that know more about these cases than Bill. Bill Turley has been instrumental in helping to make California’s strong worker protection laws. 


Just because Bill has had a long track record of success in settling these cases doesn’t mean they will win any other case. As Bill is quick to tell you, past success in similar cases doesn’t guarantee success in future cases. Every case is different. 

William Turley
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