An employee may be paid by “piece-rate” or “piece work” compensation. Piece-rate or piece work compensation is defined as “[w]ork paid for according to the number of units turned out.” DLSE Enforcement Policies and Interpretations Manual § 2.5.1. Some examples of piece-rate or piece work compensation are:
1. Automobile mechanics paid on a “book rate” (i.e., brake job, one hour and fifty minutes, tune-up, one hour, etc.) usually based on the Chilton Manual or similar;
2. Nurses paid on the basis of the number of procedures performed;
3. Carpet layer paid by the yard of carpet laid;
4. Technician paid by the number of telephones installed;
5. Factory worker paid by the widget completed;
6. Carpenter paid by the linear foot on framing job.
DLSE Enforcement Policies and Interpretations Manual § 2.5.2.
California Labor Code § 226.2 went into effect on January 1, 2016, and includes new requirements for employers who pay employees on a piece-rate basis.
First, employees must be compensated for rest and recovery periods and nonproductive time separate from the piece-rate compensation. California Labor Code § 226.2(a)(1). “Nonproductive time” is defined as “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.” California Labor Code § 226.2.
The rate paid for rest and recovery periods must be no less than (1) the “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,” or (2) the applicable minimum wage, whichever is higher. California Labor Code § 226.2(a)(3)(A). Nonproductive time must be paid at an hourly rate that is no less than the applicable minimum wage. California Labor Code § 226.2(a)(4).
Next, the hours of compensation for rest and recovery periods and nonproductive time must also be specified in the employee’s itemized wage statement. California Labor Code § 226.2(a)(2).
Although this legislation is effective January 1, 2016, employers may still be liable for uncompensated rest and recovery periods and nonproductive time for the period of July 1, 2012, to December 31, 2015. California Labor Code § 226.2(b)(1).
All overtime and minimum wage compensation requirements must still be met, as section 226.2 does not alter those requirements. California Labor Code § 226.2.