An auto dealership compensated its mechanics based on a "piece rate" system. For repairs, the company would pay the employees based on a standard period of time allowed for a repair (flag hours). The pay rate was significantly higher than minimum wage. So, if the job took longer than standard hours, there was enough wages to ensure the mechanic earned more than minimum wage.
But the mechanics spent significant time at work NOT performing repairs, such as in training, cleaning, etc. The dealership would calculate the total hours worked vs. the compensation it would pay for flag hours. If the pay rate fell below minimum wage, the dealership would make up the difference. The dealership did not pay a separate hourly rate for non-repair time that would not have been covered under the piece rate.
Illegal, said the court of appeal. The main issue is whether the applicable Wage Order (Wage Order 4-2001), requires payment of at least minimum wage for each hour worked, or an average of minimum wage for all hours worked in the work week. The trial court and Court of Appeal, relying on an earlier case, Armenta v. Osmose, Inc. (2005) 135 Cal.App.4th 314 agreed with the plaintiffs that the former interpretation was correct.
The bottom line is that piece-rate employees must be paid separately for work that does not fall within the scope of the work that is the subject of the piece rate. The non-related hours must be paid at least at minimum wage. Employers concerned about increased payroll costs may choose to reduce piece rates prospectively, and upon reasonable notice. They should check with their lawyers first regarding how to do this.
While you have your lawyer on the phone, another wrinkle may be determining where the piece rate work ends and the non-related work begins. What, exactly, goes into the calculation of the piece rate repair time? If the employer over-includes non-related work into the piece rate, it risks liability if the work should have been classified as non-related.
This case is Gonzalez v. Downtown LA Motors and the opinion is here.
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