©2023 Seyfarth Shaw LLP www.seyfarth.com 2023 Cal-Peculiarities | 241 7.14 Payment by Piece-Rate Legislation effective in 2016 dealt a blow to piece-rate employers already reeling from hostile judicial decisions.364 (See § 7.2.2.) This legislation codified the judge-made “pay separately for every hour worked” doctrine as to piece-rate wages, and requires that employers must: Pay piece-rate employees for rest and recovery breaks (and all periods of “other nonproductive time”) separately from, and in addition to, their piece-rate pay. “Other 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.”365 The law specifies a formula for calculating the required pay rate for rest breaks. Provide piece-rate employees with wage statements that include the pay period, the total hours of compensable rest and recovery breaks, the rate of pay for those breaks, and the gross wages paid for those breaks during the pay period. List, for the pay period, the total hours of other non-productive time, the pay rate for that time, and the gross wages paid, if the employer does not pay a base hourly rate for all hours worked (in addition to piece-rate wages).366 In 2019 the Court of Appeal rejected a constitutional challenge to the piece-rate statute. The plaintiffs were agricultural and construction employers who reasonably relied upon a fair piece-rate compensation system to pay their employees. These employers found the 2016 law so unclear that it was impossible for them to know how to comply and whether to elect to commit to the requirements necessary to claim a complicated affirmative defense available under the statute. Rejecting this claim, the Court of Appeal affirmed a denial of relief, reasoning that the statutory phrase “other nonproductive time” is not unconstitutionally vague.367 DLSE guidance. The DLSE has issued a Fact Sheet and Frequently Asked Questions regarding the piece-rate law. Among the highlights: Employers may not realize they have “piece-rate” employees. The DLSE suggests that the piece-rate law applies to employers that pay employees only partly on a piece-rate basis. For example, an employer may pay piece-rates on certain days of the week and pay hourly wages on other days. The DLSE’s wagerate calculation examples indicate that during a week where an employee performs piece-rate work on some days but not others, the employer must (1) include earnings from days in which no piece-rate work was performed in calculating the average hourly wage for the week, and (2) pay the average hourly wage for all rest breaks during the week, even if the employee performed no piece work on a given day. This guidance arguably deviates from the intent of the statute, because on days where the employee performs no piece-rate work, there should be no need to have rest breaks paid at a higher hourly rate. Commissions are (mostly) not “piece-rates.” The DLSE Fact Sheet offers some comfort to employers by clarifying that the new law does not apply to commissioned employees. But the DLSE warns that some payments labelled as “commissions” may actually be piece-rates, such as where the employee receiving “commissions” is not principally involved in selling the product or service or where the payment is not calculated as a percentage of the product or service sold. Another “regular rate” trap for the unwary. The DLSE Fact Sheet creates a potential pitfall on how to calculate the “total compensation” for the workweek. The DLSE advises that all “remuneration” included in calculating the regular rate of pay for purposes of overtime premium pay (e.g., the value of meals, lodging, and other non-monetary remuneration) should also be included in determining the total
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