202 | 2023 Cal-Peculiarities ©2023 Seyfarth Shaw LLP www.seyfarth.com work within a workweek. And the FLSA also permits employers to pay employees a piece or commission rate, without specially compensating employees for non-productive working time, so long as their average hourly wage meets the minimum. In California, it’s different. Development of a peculiar doctrine. The DLSE historically has interpreted California law to require that employees be paid the minimum wage separately for each hour deemed to be time worked, regardless of what the employees earn on average.14 Courts eventually have endorsed this California-specific approach.15 The Court of Appeal held that drivers, paid on the basis of mileage and at certain hourly rates for certain tasks, must be paid additionally for each rest break: “a piece-rate compensation formula that does not compensate separately for rest periods does not comply with California minimum wage law.”16 The Court of Appeal reached a similar conclusion as to nonexempt commissioned sales employees, holding that they, too, must be paid separately for their rest breaks.17 This Cal-peculiarity received its judicial baptism in 2005, in a Court of Appeal decision reasoning that because Labor Code provisions reveal “a clear legislative intent to protect the minimum wage rights of California employees to a great extent than federally,” California employers must provide “full payment of wages for all hours worked.”18 California courts then extended this “pay separately for every hour worked” concept to piece-rate workers. The Court of Appeal held that employers must separately pay employees the minimum wage for each hour worked—including waiting time and other time during which the employee does not earn a piece-rate. Under this interpretation of the minimum wage, an employer cannot average piece-rate earnings over the total hours worked, even if the employer guarantees that employees will earn, on average, the minimum wage for all hours worked.19 A federal court in California applied California’s peculiar “pay separately for every hour worked” principle to employees paid on a commission basis.20 In early 2017, the Court of Appeal followed suit, holding that the requirement to separately pay for rest-break time applies to employees paid on commission.21 The “pay separately for every hour worked” doctrine has extended, in the context of piece-rate work, to require employers to pay separately for rest breaks, on the rationale that rest periods count as hours worked and are paid as such for workers earning an hourly wage, but are not separately paid for in the piece-rate context (see § 7.14). A 2018 Court of Appeal decision, Certified Tire & Service Centers Wage and Hour Cases,22 endorsed a creative variable hourly based compensation system that approximated the wages paid under a traditional commission or piece-rate plan. Automotive technicians earned an hourly wage, exceeding the minimum wage, for all hours worked. A technician’s hourly rate could be higher, based on a formula that rewarded work billed to the customer. Billed dollars charged to a customer went into a formula that produced “production dollars,” which were divided by the hours worked during the pay period to determine a “base hourly rate.” If the base hourly rate exceeded the guaranteed minimum hourly rate, then the technician are paid the base hourly rate for all time worked during the pay period. If the base hourly rate were lower, then the guaranteed minimum hourly rate would apply for all such time worked. The plaintiffs challenged this pay method because it required employees to perform work that could not generate production dollars (e.g., tire rotations, oil changes, cleaning, attending meetings) and thus could not increase the base hourly wage. The plaintiffs argued that these non-productive activities were uncompensated. Certified Tire rejected this argument, because the pay plan was an hourly-based compensation system, not an activity-based compensation system: “Although the hourly rate differs from pay period to pay period because technicians have the opportunity to increase their guaranteed minimum hourly rate based on the generation of production dollars, the technicians are always paid on an hourly basis for all hours worked at a rate above
RkJQdWJsaXNoZXIy OTkwMTQ4