Workers in the auto repair, fabrication, installation, in-home servicing and similar industries are often paid by the piece, i.e. by number of units produced, or by a version of the flag hours and flag rate method of piece rate compensation, i.e. multiplying the stated number of flag hours each completed task is deemed to take to perform, by the stated flag rate (the hourly rate of pay the task is deemed to be worth or the employee’s stated hourly rate of pay), and the number of pieces made or tasks performed during the applicable pay period.
Piece rate and flag rate compensation formulas often do not provide for the payment of overtime (e.g. piece-and-a half or double-piece) based on units completed or flag hours worked after 8 actual (not flag) hours of work daily. Sometimes, employers do not even keep track of hours worked or pieces produced daily, which makes accurate wage calculation and payment difficult or impossible. Consequently, the piece rate payroll calculations often misstate the actual number of hours worked, and inaccurately compensate the employees for wages owed including overtime.
To make matters worse, some employers using the piece rate and in particular the flag hour/flag rate method of compensation have fashioned creative methods of attempting to avoid or lessen their obligation to pay overtime and minimum wage, which need to be carefully reviewed (including review of pay statements and the software used to calculate the flag hour/rate payments) to determine if all compensation owed was actually paid.
Piece rate and flag rate workers, in addition to not receiving all wages owed based on inaccurate and improper pay calculation methods, are often owed additional wages based on the employer’s failure to provide legally compliant meal and rest breaks. Affected employees may be owed one hour of pay under Labor Code sections 226.7 and 512, and the applicable Wage Orders, for each day a legally compliant meal or rest break is not provided.
Also, as for rest breaks, recent case law and newly enacted Labor Code section 226.2 makes it clear that employers must do more for their piece workers than just allow them to take one 10-minute rest break every four hour work period or major fraction thereof. The employers must also pay the piece workers additional compensation to the employee for the break periods, to make the breaks actual paid rest breaks as the law requires. Also, even if employers have recently started compensating piece rate employees separately for rest breaks per Labor Code section 226.2, workers who recently began receiving such payments from their employers may be owed significant additional compensation (up to one hour’s pay per workday) for rest breaks in previous years for which this compensation was not paid. Labor Code section 226.2 also provides that nonproductive work (time spent performing tasks which do not result in the production of compensable pieces) requires separate hourly payment as well.
Milhaupt and Cohen has recovered significant amounts for many employees improperly paid under the piece rate and flag rate systems as well, and is currently actively engaged in litigation seeking additional compensation for piece rate workers entitled to the prospective and retroactive benefits of Labor Code section 226.2.