California Court Holds That Piece Rate Workers Must Be Paid At Least Minimum Wage for Non-Piece Rate Work Time
Earlier this week, a California court issued a published decision holding that an employer who employs piece rate employees must compensate those employees at the piece rate for all piece rate work and at a rate of at least the minimum wage for each hour of non-piece rate work. It is not sufficient that an employer simply look backward at the pay period to determine if the total piece rate compensation divided by total hours worked (piece rate time and non-piece rate time) equals at least the minimum wage and then make up the difference only where the total falls below the minimum wage. The case is Gonzalez v. Downtown LA Motors.
The decision rests on uncertain footing, relying on a prior California Court of Appeal decision in Armenta v. Osmose, 135 Cal.App.4th 314 (2005). In turn, the Armenta decision relied on a 2002 DLSE opinion letter, in which the DLSE opined that piece workers must be paid at least minimum wage for all non-piece rate hours worked and that the employer may not satisfy this obligation by simply looking back at the end of the pay period at the total piece rate compensation earned and ensuring that it is equal to at least minimum wage for all hours (piece rate and non-piece) worked. In that opinion letter, however, the DLSE acknowledged that California minimum wage law is susceptible to a divergent interpretation that the backward-looking/averaging approach is permissible. Some California federal courts have also held that the backward-looking/averaging approach is proper. To add to the confusion, the DLSE itself flip-flopped on its own interpretation of what is required in this situation. In an earlier DLSE Interpretive Bulletin, the DLSE endorsed the backward-looking/averaging method. See DLSE Interpretive Bulletin No. 84-3 (Feb. 1, 1984). However, without explanation, the DLSE reversed its position several years later, explaining in its Operations and Procedures Manual that piece rate workers, in addition to their piece rate compensation, separately must be paid at least minimum wage for all non-piece rate hours worked.
Of course, the employer in the Gonzalez case did not get any break from interpreting the law the same way the DLSE has at times interpreted it. Instead, the employer was found liable to a class of piece rate employees for minimum wage violations and was ordered to pay the class for all unpaid minimum wages, as well as penalties for “willful” violation of the law. Apparently, it’s only okay for the DLSE to get it wrong when trying to interpret the exact requirements of California wage and hour law.
Unless and until there is a positive change in legal authority on this issue in California, employers who pay workers on a piece rate basis may want to take a cautious approach and pay these workers not only their piece rate for piece rate work, but also minimum wage for non-piece rate work hours.