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Issue 2 - 2013 Newsletter

In This Issue:

  • Piece Rate, Commission and Other Alternative Wage Payments Systems Raise Wage & Labor Code Compliance Issues
  • Mandatory Form for All California New Hires – Are You Providing Updates?

Piece Rate, Commission and Other Alternative Wage Payments Systems Raise Wage & Labor Code Compliance Issues

Employers who compensate non-exempt employees based on productivity (otherwise known as piece-rate) and commissions should seek advice from employment counsel in light of two recent California appellate court decisions.

In Bluford v. Safeway Stores, Inc., Plaintiff Kenneth Bluford claimed that Safeway did not provide paid rest breaks to truck-drivers because its compensation system, based on miles driven and the performance of specific tasks, did not account for rest periods or provide an ability to be paid for them.  The drivers were compensated by a formula that was meant to reward efficiency, and was based on (1) negotiated mileage rates applied according to the number of miles driven, the time of day the trips were taken, and the locations where the trips began and ended; (2) fixed rates for certain tasks; (3) an hourly rate for a predetermined amount of minutes for certain tasks; and (4) an hourly rate for delays (e.g., breakdowns, etc.).  Safeway argued that the drivers’ compensation system guaranteed them a minimum wage rate for all hours worked which included paid rest breaks.

The court ruled that Safeway’s inclusion of rest periods in the total hours worked for purposes of calculating employees’ task-based compensation system violated California’s requirement that employees receive paid rest breaks.  The court interpreted the law to require that rest periods be separately compensated in a piece-rate system.  The court decided that a piece-rate compensation formula that does not compensate employees separately for rest periods does not comply with California law.

In another California appellate court decision, Gonzalez v. Downtown L.A. Motors., automobile technician-employees sued for compensation for on-the clock-time while waiting to perform productive repair tasks for which they were being paid on a piece rate basis.  Although the employees’ average hourly wage rate exceeded minimum wage requirements, the court held that the waiting time was not encompassed by the piece rate formula.  The court of appeals upheld a trial court award of over a million dollars in unpaid waiting time, plus interest, and attorneys fees.

The reasoning in the Safeway and Gonzalez cases could also be applied to situations when employees are paid solely on a commission basis.  For example, when commissioned sales employees are performing non-sales generating tasks during their shifts (i.e. stocking shelves) or waiting to participate in a sales transaction, an argument can be made that they are not being compensated for this time even though they are guaranteed to earn minimum wage or above for all hours worked.

It might well have been a different legal outcome for Safeway and Downtown L.A. Motors had they established a base hourly wage rate and integrated it with a piece/task rate or commission-based compensation system. If your company pays non-exempt employees on any basis other than payment for time, now is the time to review your compensation plans in light of recent California judicial decisions.


Mandatory Form for All California New Hires – Are You Providing Updates?

California’s Wage Prevention Theft Act (the “Act”), Labor Code Section 2810.5, took effect on January 1, 2012.  The Act requires employers to give covered, non-exempt employees a customized notice at the time of hire with the following specific information about their wages and other employment-related information upon hire:

  • The rate or rates of pay and basis thereof, whether paid by the hour, shift, day, week, salary, piece, commission, or otherwise, including any rates for overtime, as applicable;
  • Allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances;
  • The regular payday designated by the employer in accordance with the requirements of the Labor Code;
  • The name of the employer, including any “doing business as” names used by the employer;
  • The physical address of the employer’s main office or principal place of business, and a mailing address, if different;
  • The telephone number of the employer;
  • The name, address, and telephone number of the employer’s workers’ compensation insurance carrier;
  • Any other information the Labor Commissioner deems material and necessary.

All non-exempt, private sector employees are covered by the Act for purposes of receiving the notice, except employees covered by a collective bargaining agreement that provides premium overtime rates and an hourly wage that is at least 30 percent more than minimum wage.  The notice must be provided to employees “in the language the employer normally uses to communicate employment-related information with the employee.”

Most employers are now following this law with new hires.  But, are you providing updates? If any of the above required notice information changes, the employer must provide the employees notice of these changes within seven days by: (1) providing a written amendment to the statement; (2) issuing an entirely new notice; or, (3) via paycheck stub, if the updated information is contained on the paycheck stub.

For more information about the mandatory form requirement and updates, the Labor Commissioner posted responses to Frequently Asked Questions.
(“FAQs” at: http://www.dir.ca.gov/dlse/FAQs-NoticeToEmployee.html.)

Issue 3 - 2013 Newsletter | What's New For Employe...
Issue 1 - 2013 Newsletter

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Walnut Creek, CA 94596
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