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AB 1513 - New Requirements for Employers Who Pay Piece-Rate Compensation

AB 1513 sets forth various new requirements for employers who pay employees piece-rate compensation. Effective January 1, 2016, section 226.2 will be added to the California Labor Code.

Labor Code section 226.2 creates numerous mandates for employers, including, but not limited to the following:

· Employees shall be compensated for rest and recovery periods and other nonproductive time separate from any piece-rate compensation.

· Itemized statements (as required under Labor Code section 226 (a)) must, in addition to the current requirements, separately include the following information:

1. 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.

2. The total hours of other nonproductive time, the rate of compensation, and the gross wages paid for that time during the pay period.

· Employees must be compensated for rest and recovery periods at a regularly hourly rate that is no less than the higher of:

1. The average hourly rate determined by dividing the total compensation for the workweek (excluding compensation for rest and recovery periods and any premium compensation for overtime), by the total hours worked during the workweek (excluding rest and recovery periods) or

2. The applicable minimum wage.

· For employers who pay employees on a semimonthly basis, employees must be compensated at least at the applicable minimum wage rate for rest and recovery periods together with other wages for the payroll period during which the rest and recovery periods occurred. Any additional compensation required for those employees is payable no later than the payday for the next regular payroll period.

· Employees shall be compensated for other nonproductive time at an hourly rate that is no less than the applicable minimum wage.

1. The amount of other nonproductive time may be determined either through actual records or the employer's reasonable estimates, of other nonproductive time worked during the pay period.

2. An employer who makes a "good faith error" in determining the total or estimated amount of other nonproductive time worked during the pay period is liable for the payment of compensation for all hours worked in other nonproductive time, but is not liable for statutory civil penalties if the employer:

a. Has provided wage statement information and paid compensation for the amount of other nonproductive time; and

b. The total compensation paid for any day in the pay period is not less than minimum wage and any required overtime compensation.

An employer, who, in addition to paying any piece-rate compensation, pays an hourly rate of at least the applicable minimum wage for all hours worked, shall be deemed in compliance with the mandates described above.

AB 1513 creates an affirmative defense for employers against whom any claim or cause of action for recovery of wages, damages, liquidated damages, statutory penalties, or civil penalties such as liquidated damages, based solely on the employer's failure to timely pay the employee compensation due for rest and recovery periods and other nonproductive time for time periods prior to and including December 31, 2015, if, by no later than December 15, 2016, an employer complies with ALL of the following:

1. The employer makes payments to each former and current employee for the amount of rest time and other non-productive rest time that was not separately compensated from July 1, 2012 and December 31, 2015. The employee can make payments based on either of the following formulas:

a. The actual amount of wages owed for rest and non-productive time that is required to be separately compensated, plus interest; or

b. An amount equal to four (4) percent of the employee's gross earnings in pay periods where any work was performed on a piece-rate basis between July 1, 2012 and December 31, 2015.

i. The amount paid to each employee may be reduced for amounts already paid for other unproductive time by up to one (1) percent (of the previously mentioned four (4) percent) of the employee's gross earnings during this time period.

2. The employer makes a good faith effort to locate and make payments to every former employee who would qualify for these payments.

3. The employer gives written notice to the Department of Industrial Relations by July 1, 2016 of its intention to make these payments.

Any employer who satisfies the requirements above may assert this affirmative defense in any action or claim filed on or after March 1, 2014, unless a judgment has already been entered and time to appeal has expired by the end of 2015.

For any questions regarding AB 1513 or any other employment or labor relations inquiries, please contact any of our attorneys at Sagaser, Watkins & Wieland PC at (559) 421-7000.

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