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California Court Strikes a Blow to Piece Rate Employment


Piece work is defined by Wikipedia as any type of employment in which a worker is paid a fixed piece rate for each unit produced or action performed regardless of time. Piece rate work is the oldest form of performance related pay.

A California appeals court ruled Tuesday that a class of auto mechanics paid on a piece-rate basis were also entitled to minimum wages for time spent waiting during their shifts and that their employer could not average their compensation to show minimum wage compliance.

The case involved a Mercedes Benz dealership called Downtown LA Motors LP.  The dealership employed a practice whereby it paid technicians well above minimum wage for the time spent working on repairs, ensured that a worker’s pay never fell below this minimum threshold by supplementing the technician’s pay if it did.

The issue at stake was whether an employer who compensates its automotive service technicians on a piece rate basis for repair work must also pay those technicians a separate minimum hourly wage for the time spent during their work shifts waiting for vehicles to repair or performing other non repair tasks during their downtime.

The dealership sought to use an averaging method (i.e. above hour minimum wage while  working to repair vehicles and no wages while idle) to determine an employer’s minimum wage obligations under California State law.  The second District Court used the 2005 ruling in Armenta v. Osmose Inc. to determine that the dealership had violated California State law by failing to pay the technicians minimum wage for the hours they spent waiting to repair cars during their shift.

The court rejected the argument presented by the dealership that it was not required to pay the technicians a separate hourly minimum wage for the waiting time because it used a formula to insure that the compensation paid to that technician for the total hours spent at work always exceeded the minimum hourly wage required under California State law.  This was achieved by supplementing a technician’s pay anytime that the total pay fell below the minimum hourly wage requirement for the total time period spent at work.

The Appeals Court upheld the lower court’s award of $1.5 million that was to be paid to the technician class and added another $237,840 in penalties for the dealership’s willful failure to pay wages.

What’s interesting is that this particular case is only one of several cases related to piece rate pay and commission pay that are pending in the State of California. These cases are estimated to affect close to 2 million employees in the State of California.