Paid per piece? Be sure you’re paid for ALL hours worked

Yadir Ontiveros worked as a technician for Safelite, a company which repairs and replaces vehicle glass for automobiles at various locations in California. Safelight’s technicians are classified as non-exempt employees. They are compensated under a Performance Pay Plan (“PPP”), which is a pay table that lists the amount employees will receive for performing particular tasks for a particular type of customer.

In the PPP, the employee’s take-home pay can vary from week to week depending on “personal productivity.” (This is the employee’s piece rate pay.) To provide some predictability to employees’ earnings, employees are paid a base hourly rate. That base rate is not intended to be the employee’s total pay, since the employee is expected to earn more during the week by doing installations and repairs for which the employee is paid per piece.  Thus, the total hourly or base pay each week is treated as an advance against the total PPP piece rate pay for the week.

If the total piece rate pay for the week is greater than the weekly advance, the amount that exceeds the advance will be added to the paycheck as incentive. If the piece rate pay is less than the weekly advance, the employee will not receive additional pay and a shortfall will be reflected in the paycheck. Shortfalls are not carried over to the next pay period.

The technicians sued their employer claiming that under the employer’s pay plan, they are not paid for all hours worked. The employees argued that the pay plan does not comply with California law governing piece-rate compensation. However, the employer asked the court to throw out the case, stating that they complied with the law.

The court noted that piece-rate compensation involves a method of calculating compensation based on the type and number of tasks completed, rather than by the number of hours worked. The court further noted that California law provides that every employer shall pay to each employee not less than the applicable minimum wage for all hours worked in the payroll period, whether the remuneration is measured by time, piece, commission, or otherwise.

California courts prohibit employers who use a piece-rate compensation system from averaging productive and non-productive hours for purposes of demonstrating compliance with the minimum wage statute. Thus, although employers may compensate their employees based on the number of tasks completed, employees must receive at least minimum wage for every hour worked, whether or not they complete any compensable tasks during that hour.

In the case of the technicians, the court refused to dismiss the case. After reviewing the math, the court ruled that the employer’s pay plan indeed fails to ensure that employees are paid at least minimum wage for each additional hour worked. Not only that, the pay plan formula fails to ensure that employees will receive overtime pay. Lastly, the pay formula fails to ensure that employees will be compensated for rest periods.

Rather than continue with litigation, the parties settled the case and the employer agreed to pay $8.2 million to the technicians.

If employers pay per piece, the piece-rate scheme must be clearly provided in the employees’ paystubs.  Piece-rate employees, like hourly employees, are also entitled to overtime pay if they worked more than 8 hours per day or more than 40 hours per week. The overtime pay is computed according to specific methods provided by law.

Piece-rate employees who work overtime hours need to make sure that the employer is not using the piece rate method to avoid paying overtime.

The Law Offices of C. Joe Sayas, Jr. welcomes inquiries about this topic. All inquiries are confidential and at no-cost. You can contact the office at (818) 291-0088 or visit www.joesayaslaw.com. [C. Joe Sayas, Jr., Esq. is an experienced trial attorney who has successfully recovered wages and other monetary damages for thousands of employees and consumers. He was named Top Labor & Employment Attorney in California by the Daily Journal, consistently selected as Super Lawyer by the Los Angeles Magazine, and is a Presidential Awardee for Outstanding Filipino Overseas in 2018.]