New Piece-Rate Law Toughens Rest & Recovery Compensation Rules in California

April 7, 2016

Last updated on November 17, 2023


Employees are entitled to rest and recovery breaks according to California Labor Law. A new law effective January 1, 2016 has clarified the rules for calculating compensation and how workers are to be paid for rest, recovery and other non-productive time. Employers are required to be retroactively compliant to July 1, 2012, and must notify the Department of Labor (via the Department of Industrial Relations) by July 1, 2016 of how they intend to ‘square up’ with their workers by Dec 15, 2016.

Piece-rate compensation is defined by the nature of the work rather than the label applied to the work. For example, a ‘commission’ based on anything other than sales is considered piece-rate work. Piece rate compensation can make sense as a way to motivate employees to be more productive and is common in several job categories. For example, farm workers are often paid by the quantity picked and auto repair shops may pay by the ‘book rate’ hours regardless of how many hours were actually worked.

The new piece-rate law directly addresses the issue of compensation for non-productive time—when the worker is working or “under the direct control of the employer.” This includes rest and recovery breaks (which must be provided) and other non-productive time including when a worker is waiting for work, preparing for work, traveling under the control of the employer. Employers have long been responsible for providing paid breaks for employees, but the method of calculating the pay has not always been clear. Now it is.

The new Piece-rate law specifies that rest and recovery pay must be calculated separately from the piece-rate compensation. The employer cannot build the rest time compensation into the piece rate. Instead, the pay for rest, recovery and other non-productive work must be based on the total pay for the period and the total hours worked. The new Labor Code is very clear on how the time should be compensated. Compensation for rest and recovery and other non-productive time is tied to the total piece-rate compensation and cross-checked with minimum wage.

Employers have a short window of time to ‘cure’ any violations from the last four years. They have the choice of calculating the shortfall for each employee and paying that shortfall plus accrued interest, or they can pay 4% of employee gross earnings less anything already paid—not to exceed 1%. Employers must choose and the corresponding pay statements must list very specific information including how the payment was calculated.

Employers have a substantial obligation to piece-rate workers. They must advise employees of their right to breaks and not discourage them in any way from taking breaks. They must pay employees for rest and recovery breaks as well as all non-productive time separately based on their ‘regular rate of pay’ calculated from hours worked and total compensation for the period. Overtime, bonuses, and any other special pay must be properly calculated and may affect the regular rate of pay. Employers must include on every pay stub how rest and recovery and other non-productive compensation was calculated and it must be clear to the worker how their pay is calculated. Any variance from these rules is a labor code violation.

Unfortunately with piece-rate compensation there are many ways that workers can be shortchanged, intentionally or not. The new piece-rate law provides an opportunity for companies to pay their current and former workers any shortages caused by past improper rest and recovery pay calculations and set things right. Companies that are not in compliance are open to civil action by their workers who are represented by an employment attorney.

California Labor law gives employees basic rights and requires that workers be paid at least the minimum wage during rest, recovery and non-productive time. If you have not been paid for this time, believe that you have been underpaid, or would like to investigate if you are being paid correctly we suggest you seek legal counsel. The attorneys at Donahoo & Associates, PC will provide a confidential analysis and case assessment free of charge.

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