California Employers, Is Your Piece Rate Plan Up To Date?
A piece rate exists where an employee is paid a fixed amount for each unit produced or action performed. Industries that commonly use piece rates include agriculture, automobile repair, trucking, manufacturing, and call centers.
A new California law went into effect this year requiring employers to provide additional pay for rest periods and recovery periods to employees who are compensated on a piece rate basis, even if the employees also are paid minimum wage. A recovery period is a cool-down period provided to an employee to avoid heat illness.
Employees who are not paid a minimum wage in addition to the piece rate, also must be paid separately for “nonproductive time.” Nonproductive time is time under the employer’s control, excluding rest and recovery periods, that is not directly related to the activity being compensated on a piece rate basis.
The rate of pay for rest and recovery periods generally is determined by taking the employee’s total compensation received per workweek (excluding any minimum wage paid for rest/recovery periods and excluding overtime pay), and dividing it by the total hours worked during the workweek. Examples of how to calculate pay for rest and recovery periods are listed on the California Division of Labor Standards website here.
Piece rates are not commissions. Commissions involve sales work and typically are earned as a percentage of the sales price or percentage of a profit made from a sale. Commissions involve earnings in proportion to the amount of the sale, while piece rates, if related to sales, involve a fixed amount no matter how large or small the sale.