Rest and Recovery Break Payments For Piece Rate Workers October 14, 2015
Mixed in with several workers compensation changes is a key piece of legislation affecting any type of piece rate worker (except car mechanics), including agricultural, transportation logistics, and home health care workers. AB 1513 creates section 226.2 to require, as of January 1, 2016, piece rate workers to be separately compensated for rest or (heat related) recovery periods and to record separately on the pay stub the compensable rest and recovery periods. It also provides for an amnesty period for employers to make good on back pay obligations for these payments through July 1, 2012. The compensation rate must be at the average rate for the piece-rate during the same work period or, if no piece rate applicable for that week, then at least at minimum wage. Special rules apply for back pay reimbursements.
Recent case law established that piece rate workers should be separately compensated for rest breaks. Previously, these breaks were considered paid as part of the piece rate compensation. There was also debate about whether the rest breaks could be compensated at minimum wage, like other tasks not involved in the creation of the “piece” (“non-productive time” such as exercise, travel, safety meetings, and time waiting to be engaged to harvest). It is clear now that rest and recovery periods must be paid at a higher rate than other non-productive time, depending on what the employee earned from all non-overtime sources in the workweek. This statute also gives some claim relief for failure to pay such rates prior to December 31, 2015 (but they still must be paid). The details:
Pay Stub. The pay stub (or other itemized statement) for piece rate workers must separately state the total hours of compensable rest and recovery periods, the rate of compensation, and the gross wages paid for those periods during the pay period, and the total hours of other nonproductive time (exercise, etc), as specified, the rate of compensation, and the gross wages paid for that time during the pay period. [226.2(a)(2)].
Compensation Separate from Piece Rate. Piece rate employees must be compensated for rest and recovery periods and other nonproductive time at or above specified minimum hourly rates, separately from any piece rate compensation. The bill defines “other nonproductive time” for purposes of these provisions to mean 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 (exercise, etc.). [226.2(a)(1)].
Other Non-Productive Time. Non-productive time, other than rest and recovery periods, may be compensated at minimum wage. This time may be determined through actual records or employer’s reasonable estimates, whether for a group of employees or a single employee. [226.2(a)(4-5)].
Mistakes by Employer for Non-Productive Time. The employer is liable for paying for time owed in this category, but shall not be subject to penalties so long as the employer paid at least minimum wage for the hours worked and complied with the wage statement requirements. [226.2(a)(6)].
Compensation Rate/Rest and Recovery Periods. Piece rate employees shall be compensated for rest and recovery periods at a rate no less than the higher of the average hourly rate for the workweek derived from all sources of compensation (not including the time spent during rest and recovery periods, and not including overtime), or minimum wage (i.e., whichever is higher). [226.2(a)(3)(A)(i)-(ii)].
Payment Example for Rest and Recovery Periods: Employee receives gross piece rate wages of $800 (exceeding minimum wage for that pay period) and non-productive time wages of $20 (not including rest and recovery payments). Total applicable wages for the workweek are $820, divided by the number of hours worked of 57 hours (excluding rest and recovery periods). Hourly rate is $14.39. Rest and recovery periods are paid at this rate.
Semi-Monthly Pay Periods. If an employee is paid twice a month, the employer may not have time to calculate the average hourly rate derived from the piece rate. In that situation, the employer may pay minimum wage and then pay the excess on the next paycheck. For example, if pay day is the 15th for the first of the month through the 15th, the employer wouldn’t have time to calculate the average rate. [226.2(a)(3)(B)].
Large Public Employers. There are very specific requirements for larger publicly traded employers acquired by another entity between July and October 2015, giving them a grace period for programming their payroll systems to meet these requirements. [226.2(a)(3)(C)].
Amnesty: Prior Years’ Break Time Payments. For unpaid rest and recover periods prior to December 31, 2015, the employer shall have until December 15, 2016 within which to pay employees the appropriate payments for past years beginning July 1, 2012 through December 31, 2015. If done timely and properly, this shall be a complete defense to any claim of non- or late payment. [226.2(b)]. Payment can be calculated in one of two ways [226.2(b)(1)(A-B)]:
The payment must be consistent with paragraph 6 above and interest must be included using a formula set forth in Labor Code section 98.1; OR
The employer pays each employee 4% of the employee’s gross earnings during the applicable piece rate pay periods beginning July 1, 2012 (less amounts paid for rest and recovery periods and other nonproductive time, provided that this reduction shall not be more than 1% of the employee’s gross earnings).
Amnesty Inapplicable. An employer need not make back payments to an employee if the employee has, prior to August 1, 2015, signed a valid release of claims that related to rest and recovery periods and other nonproductive time OR a valid release has been filed with the court and approved by the court prior to October 1, 2015. [226.2(b)(2)].
Report to Labor Commission. No later than July 1, 2016 the employer shall provide written notice to the Director of Industrial Relations of its election to make payments to current and former employees. As with alternative workweek elections, the Director will publish on the Internet a list of employers who have provided the required notice. [226.2(b)(3)].
Payment Timing and Unfound Former Employees. Employers shall make the payments as soon as reasonable feasible after giving the notice. For former employees who cannot be located, the employer shall provide notice to the Labor Commissioner pursuant to Labor Code Section 96.7. [226.2(b)(4)].
Notice to Employees. The employer must provide each recipient a statement as to which formula was used to calculate the payment. Depending on which formula is used, the employer must provide a spreadsheet showing the pay periods and calculation method. [226.2(b)(5)(A-E)].
Good Faith Mistakes. If an employer shows that it made a payment error or omission in good faith, and then rectifies the error within 30 days of discovery, after satisfying certain documentation requirements, the employer may still be deemed in compliance. [226.2(c)].
Location of Former Employees and Fee to Labor Commission. Employers shall use due diligence including the use of “people locator services” to pay former employees. If payment is made to the Labor Commission instead, the employer shall pay an additional administrative fee equal to one-half of 1 percent of the aggregate payments made, or $2,500, whichever is less. Employers must include name, payment amount, social security number and last known address. [226.2(d)(1-2).
Preservation of Records. Employers are required to maintain all records related to payments until December 16, 2020, and shall furnish such records to any employee who requests them. [226.2(d)(3)].
Tolling Period. If the employer fails to provide the required notice between January 1, 2016 and July 1, 2016, or ending December 31, 2016, if the employer has provided the notice, the statute of limitation shall be tolled for non-payment prior to January 1, 2016 (i.e., the employer is still liable for payments back to July 1, 2012 even if the statute of limitation might otherwise have run). [226.2(e)].
Prior PAGA Notices. If an employee has made a PAGA claim (Labor Code section 2699.3) to the Labor and Workforce Development Agency alleging violation of the rest and recovery period payments on or before December 31, 2015, such notice shall be void as to those allegations. Such notices may be made after that date and shall be subject to the tolling period referenced above. [226.2(f)].
Exceptions to These New Rules. Several exceptions apply [226.2(g)]:
Claims previously adjudicated and not subject to further appeal as of January 1, 2016;
Employees may continue to pursue lawsuits for failure to pay for rest and recovery periods, if filed prior to March 1, 2014, and amended as to these issues prior to July 1, 2015, provided that the claims included allegations that employees were “not advised of their right to take rest or recovery breaks, that rest and recovery breaks were not made available, or that employees were discouraged or otherwise prevented from taking such breaks.”
Claims that accrue after January 1, 2016.
Claims in cases filed prior to April 1, 2015 in which there are allegations that the employer intentionally stole, diminished or deprived employees of wages through use of fictitious workers names or workers not actually working.
The rules do not apply to new motor vehicle dealers as defined in Section 426 of the Vehicle Code.
Pending Lawsuits. Employers may use this law to assert an affirmative defense in any pending lawsuit filed on or after March 1, 2014, unless final and not subject to further appeal as of January 1, 2016. [226.2(h)]. Courts may continue to award attorney fees for actions filed before October 1, 2015. [226.2(j)].
Sunset Provision. The statute expires on January 1, 2021. [226.2(k)].