What You Should Know About the Piece-Rate Pay System in California

Author: Nicki Malekadeli
Posted on: November 18, 2019

Fernando Jimenez-Sanchez and Porfirio Preciado were workers employed under Dark Horse Express, Inc., both of whom delivered milk and were paid on a piece-rate basis per load. They recently filed a class action lawsuit against the aforementioned company, claiming that they were not compensated for nonproductive time (an overview of the case may be found here) as required by California Law. But what exactly are the implications and policies under this particular incentive wage system, for workers and/or employees?

Piece-Rate Pay System Defined

The Department of Industrial Relations of the State of California defines the term “piece-rate”, also known as “piece-work”, as the “work paid for according to the number of units turned out”. A piece-rate implies that there is a base amount to be paid per unit produced by the worker, may it be for completing a task or producing a product in manufacturing. Some examples of industries that utilize piece-rate plans include the following:

  • Manufacturing or factory workers
  • Agriculture
  • Technicians
  • Delivery services
  • Automobile mechanics
  • Construction work
  • Jewelry making
  • House cleaning

Assembly Bill No. 1513 (Labor Code section 226.2)

This was approved on October 10, 2015, and implemented on January 1, 2016. It added the California Labor Code Section 226.2. This law administers rules only in relation to piece-rate workers, the main policy being: rest and recovery, eating of meals, as well as other nonproductive time (meaning “time under the employer’s control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis”) spent at work, should be rightfully compensated for and included in the worker’s wages. All hours of work should be taken into account.

The following policies are quoted from the Labor Code:

A. Employees shall be compensated for rest and recovery periods at a regular hourly rate that is no less than the higher of:

  • An average hourly rate determined by dividing the total compensation for the workweek, exclusive of compensation for rest and recovery periods and any premium compensation for overtime, by the total hours worked during the workweek, exclusive of rest and recovery periods.
  • The applicable minimum wage.

B. For employers who pay on a semi-monthly basis, employees shall be compensated at least at the applicable minimum wage rate for the rest and recovery periods together with other wages for the payroll period during which the rest and recovery periods occurred. Any additional compensation required is payable no later than the payday for the next regular payroll period.

Rest and Recovery Period

Rest and recovery periods are limited to authorized breaks. They are defined in existing wage orders. An example is the wage order for the transportation industry wherein it states the following:

“Every employer shall authorize and permit all employees to take rest periods, which insofar as practicable shall be in the middle of each work period. The authorized rest period time shall be based on the total hours worked daily at the rate of ten (10) minutes net rest time per four (4) hours or major fraction thereof. However, a rest period need not be authorized for employees whose total daily work time is less than three and one-half (31 /2) hours. Authorized rest period time shall be counted as hours worked for which there shall be no deduction from wages. (B) If an employer fails to provide an employee a rest period in accordance with the applicable provisions of this order, the employer shall pay the employee one (1) hour of pay at the employee’s regular rate of compensation for each workday that the rest period is not provided.”

Computing the Hourly Rate for Rest and Recovery Periods

  • A = number of work days 
  • B = total hours of work per week
  • C = rest period per day in minutes
  • D = rest period per week in hours
  • E = compensation for the workweek
  • n = compensation for work per hour (excluding rest periods)
  • x = compensation for rest periods

Formulas:
n = E / (B – D)
n / D = x
E + x = total compensation for the workweek including rest periods

Example:

Judy works 5 times a week for 14 hours, a total of 70 hours per week. She is given a thirty-minute break per day for a total of 150 minutes per week. She earns $840 in piece rate compensation for the entire week.

  • A = 5 days
  • B = 70 hours
  • C = 30 minutes
  • D = 2.5 hours
  • E = $840
  • n = compensation for work per hour (excluding rest periods)
  • x = compensation for rest periods

n = E / (B – D)
n = 840 / (70 – 2.5)
n = 12.44

n / D = x
12.44 / 2.5 = x
x = 4.97

E + x = 840 + 4.97
E + x = $844.97

Judy must be paid $844.97.

With these laws being implemented and strengthened, piece-rate employees should never be afraid to call for help if they feel that their rights are being violated or trampled upon. These laws should fuel the fire, so that workers may realize their rights to rest and recover are just as important as the work that they do. The existence of this particular clear and concise law should serve as a way to uplift the morale of piece-rate workers. 

This law must serve its purpose; to empower the people so that they may be motivated to work to the best of their abilities. To be able to produce quality output not just for the market, but to feel growth and satisfaction within their chosen workplace and careers. Employees can work happily and more productively if they are treated fairly and in a humane manner. 

If one feels the need to assert his/her/their right to proper piece-rate wages, do not hesitate to contact and seek help from seasoned employment lawyers in California.