Piece-Rate Work: What Is It and When Is It Legal?

A recent wave of class action lawsuits filed in California alleges that the piece-rate method of paying employees violates federal and state wage and hour laws. Under a piece-rate compensation system, workers are paid a fixed rate for each unit produced or service performed, regardless of the amount of time the employee spent working on the task.

Many of the piece-rate lawsuits have been filed on the heels of Gonzalez v. Downtown LA Motors. In that lawsuit, a California appellate court ruled that a piece-rate compensation arrangement violates the state’s wage and hour laws if employees are not paid a separate, hourly wage that is at least equal to the minimum in California, which currently stands at $9.00 per hour. The appellate court approved a trial judge’s order requiring the Mercedes-Benz dealership to pay its mechanics and automotive service technicians $1.5 million for the time they spent waiting to perform work that was not compensated with a separate hourly wage.

What Types of Workers Are Paid on a Piece-Rate Basis in California?

The following types of workers are often paid on a piece-rate basis in California:

• Cable and telephone installation technicians
• Mechanics and car repair technicians
• Manufacturing and factory workers
• Computer repair technicians
• Delivery truck drivers
• Home-based manufacturing or assembly jobs

Piece-rate workers may also be entitled to overtime pay if they work more than 40 hours a week. According to the United States Department of Labor, companies must pay piece-rate workers overtime pay at one-half times an employee’s regular rate of pay. An employee’s regular rate of pay should be calculated by dividing the total pay in a workweek by the total number of hours actually worked.

CarMax, PetSmart Face Piece-Rate Lawsuits

Last month, PetSmart agreed to pay $10 million to settle a class action filed on behalf of 16,400 current and former employees who worked at 132 PetSmart locations in California. The lawsuit alleged that PetSmart violated California labor law by failing to compensate its groomers for the time they spent performing non-grooming duties, such as stocking or cleaning the store.

In addition, CarMax is currently facing a class action filed on behalf of current and former painters, detailers, mechanics and other piece-rate workers who allege that CarMax did not pay them for the time they were required to be at work – but there was no piece-rate work to be done. CarMax has stated that the lawsuit involves more than $6.5 million in unpaid minimum wage, overtime, meal and rest breaks and waiting time penalties.

Qualxserve, a California-based computer repair company, paid $2.4 million last month to settle a class action filed by two former employees who alleged that the company paid them a flat rate of between $28 and $38 per service call, which was not enough to cover overtime pay, off-the-clock work and reimbursement for expense.

If you are paid on a piece-rate basis and do not receive a separate hourly wage for non-productive time, your employer may be violating wage and hour laws.