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Piece-Rate "Fix" Effective Jan. 1

Legislation (AB 1513, Williams, D-Carpinteria) setting rules for payment of piece-rate employees’ non-productive work time will take effect on Jan. 1.

Are you ready?

AB 1513 was precipitated by two California appellate court decisions issued in 2013 that have caused confusion and fostered numerous wage-and-hour lawsuits against California farmers, farm labor contractors, and employers in other industries using piece-rate compensation plans. Those decisions held that in addition to their piece earnings, employees must be paid hourly wages for their non-piece-producing work time. 

Since the Bluford and Gonzalez decisions were handed down in 2013, numerous lawsuits have asserted claims for unpaid wages, as well as for damages and penalties that add up to several times the amount of unpaid wages.

AB 1513 requires that piece-rate employees be compensated for rest periods taken under an Industrial Welfare Commission wage order, cool-down recovery periods taken under Cal/OSHA’s Heat Illness  Prevention standard, and other nonproductive time separate from any piece-rate compensation.

Other nonproductive time means time under the employer's control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis.

A piece-rate employee must be paid for rest and recovery periods at no less than the higher of the applicable minimum wage or the employee's average hourly rate. That rate is determined by dividing the employee’s total compensation for the workweek, minus compensation for rest and recovery periods and any overtime premium compensation, by the total hours worked in the workweek minus rest and recovery periods.

AB 1513 also requires that a piece-rate employee be separately paid for other nonproductive time at a rate of at least the applicable minimum wage. By paying an hourly rate of at least the minimum wage for all hours worked in addition to piece earnings, an employer complies with this requirement – but probably not with the average hourly pay requirement for rest and recovery periods.

AB 1513 allows employers to determine other nonproductive time by using either time records or reasonable estimates. An employer who in good faith underestimated and underpaid other nonproductive time is liable for the full amount remaining due, but is not liable for penalties or damages as long as (1) the employer provided wage-statement information required by AB 1513 and paid the amount due under the employer’s erroneous calculation, and (2) the total paid for any day in the pay period is at least the applicable minimum wage plus any overtime due. Employers may use this means of determining how much they owe in wages for non-productive time in both the past and the future.

Paystubs will have to separately state “other nonproductive time” and “rest and recovery periods.” The paystubs must state for each category the total time, rate of compensation, and the gross wages paid for that time during the applicable payroll period. Exception: This information need not be shown for the other nonproductive time of employees who, in addition to their piece-rate compensation, are paid an hourly rate of at least the applicable minimum wage for all hours worked.

In addition to specifying minimum hourly rates for piece-rate employees’ non-piece-producing work time, AB 1513 enables an employer to “buy” an affirmative defense against claims for wages, damages and penalties for the employer's failure to compensate for rest and recovery periods and other nonproductive time for pay periods before and including Dec. 31, 2015. To qualify for the affirmative defense, an employer must pay employees who were uncompensated or undercompensated for their non-piece-producing work time from July 1, 2012, to Dec. 31, 2015, under one of two formulas.

Under the first formula, the employer determines and pays the actual amounts due, together with 10 percent annual interest.

Under the second formula, the employer pays each employee four percent of the employee's gross earnings in pay periods in which any piece work was done from July 1, 2012, to Dec. 31, 2015, minus amounts already paid to the employee, separate from piece-rate compensation, for rest and recovery periods and other nonproductive time during the same time. The credit for wages already paid for other nonproductive time is capped at one percent of the employee's gross earnings.

Using the 4% Formula

 Here’s a simple example of the calculation under the second formula discussed in the accompanying article; it’s for 50 weekly pay periods from July 1, 2012, to Dec. 31, 2015, in which the affected employee had piece earnings:

 Gross Pay: $50,000

 Rest and recovery time already paid by a separate hourly wage: $950

 Nonproductive time already paid by a separate hourly wage: $570, capped at 1% of gross pay: $500

 $50,000 x 4% = $2,000

 $2,000 - $950 - $500 = $550 owed to employee

An employer choosing to buy this safe-harbor affirmative defense under either formula must notify the Department of Industrial Relations of that selection by July 1, 2016. These payments must be completed by Dec. 15, 2016.

An employer must use due diligence to locate former employees. An employer that can’t locate former employees owed wages must pay the amounts due them to the Labor Commissioner, along with an administrative fee.

The fee is the lesser of 0.5% of the amounts paid or $2,500.

DIR is expected to release guidance for complying with AB 1513’s wage-payment requirements, and it is preparing to facilitate employers’ use of AB 1513’s safe harbor. 


UFW Campaign on Piece-Rate Wages

The November 10 edition of the Fresno Bee reports that the United Farm Workers union is beginning an “awareness” drive today (apparently with press conferences in Monterey, Sonoma, Madera, Fresno, Kern and Ventura counties) to inform workers they are owed unpaid wages for non-productive time under AB 1513, legislation passed by the California Legislature and signed by Governor Brown earlier this year.

According to UFW, AB 1513 may entitle workers to $8 or more per day for unpaid “unproductive” time they may have worked between July 1, 2012 and December 31, 2015.  According to UFW, “the total amount of back pay employers will owe California farm workers over the last three and one-half years will easily reach millions of dollars.”

You can see the UFW's campaign flyer here.

AB 1513 (Williams, D-Carpinteria) clarified that rest and heat illness recovery periods are to be paid at either a rate computed by dividing an employee’s total compensation for a work week, excluding compensation for rest and recovery periods and overtime premium pay by the total number of hours worked by the employee, excluding rest and recovery periods or the minimum wage.  AB 1513 also provided that other non-productive time when workers are not working to produce work that is piece-rate compensated must be separately compensated at the minimum wage.   

AB 1513 also provided a “safe harbor” allowing employers to avoid penalties and damages for past failure to separately compensate rest and recovery periods and non-productive time and failure to compensate rest and recovery periods at the average rate of compensation for the work week.  The safe harbor requires employers to either pay actual wages owed to piece-rate employees for non-productive time and rest and recovery periods, or pay employees 4% of their gross wages for each workweek they earned piece-rates between July 1, 2012 and December 31, 2015.

AB 1513 was precipitated by California appellate court decisions in Bluford v. Safeway and Gonzales v. Downtown LA Motors, in which the courts affirmed that California law requires separate compensation for rest and recovery periods and other non-productive time.  The situation was exacerbated by opinion of Labor Commissioner Julie Su that rest and recovery periods should be paid at the average rate of piece-rate compensation.

You can read more in-depth information about AB 1513 and the piece-rate safe harbor on California Farm Bureau's AgAlert website.

UFW Claims "Victory" on Tomato Contract; Who Won?

The United Farm Workers Union (UFW) celebrated a new union contract on July 27 to represent 450 tomato harvest workers in the Stockton area, with the UFW claiming 1500 workers represented in the San Joaquin Valley.


The union contract touts an hourly increase of $1.33 for tomato harvesters, but fails to mention that these newly-minted union members will be forced to pay 3% of their earnings to the union in dues.  So who really won?


You can see print coverage at this link.

More Union Organizers in the Field

The United Farm Workers (UFW) has filed additional Notices of Intent to Take Access (NAs) this week as they continue their purported effort to detect non-compliance with the Heat Illness Prevention standard and report that non-compliance to Cal/OSHA.  Under the ALRA, UFW and other unions can seek limited access to farm fields by filing a Notice of Intent to Take Access (NA) with the Agricultural Labor Relations Board (the Board).  Union organizers can legally access farm fields on private property once the petition is granted by the Board. 

Materials being given to workers by UFW bears the UFW logo and that of Cal/OSHA.  The materials include a questionnaire asking workers for identity information as well as asking if they have been provided shade and water at their work site. 

Farm employers have certain rights too:

  • Control access to your property.
  • Train your supervisors to "greet" anyone seen in the field who is not an employee, and ascertain their purpose in being there.
  • Direct non-employees to the farm office or to a supervisor.
  • Remind employees they are under no obligation to talk to anyone they don't want to talk to.

Remember that while law enforcement agencies have a legal right to access in the conduct of enforcement, union organizers have no such legal right to access unless granted that right by the Board.  

If the Board has granted that right to the union, there will be a public record of the union filing an NA, and notice of that will be duly served on the employer.Remember, legally adequate  NA requires two actions on the union's part:

  • Service: the union must serve the office of the owner, officer,or director of the employer or at the office of the employer with someone apparently in charge of the office or some other responsible person;
  • Time of access: organizers may take access one hour before work begins, one hour after work ends or for a maximum of one hour during the lunch period.

If both conditions are not met, you may ask that person to leave the premises. If that person refuses to leave he is trespassing and is subject to removal at your request by the county sheriff.  

However, extreme caution is urged in exercising the right to deny access or the right to have a trespassing union organizer removed.  UFW may characterize refusal of access as an attempt to "cover up" non-compliance with the Heat Illness Prevention standard.  Moreover, UFW may seek to capitalize on the arrest of a trespassing organizer for publicity purposes.   

Dept. of Fair Employment & Housing Provides New CFRA Poster

The California Department of Fair Employment and Housing (DFEH) has provided a revised poster reflecting changes to its regulations implementing the California Family Rights Act (see New CFRA Regulations Take Effect on July 1 FELS Newsletter, May 2015).  You can find the new poster here.

Agriculture Targeted by DOL Wage and Hour Division

From the US DOL Blog: US DOL Wage and Hour Division clearly announces that Agriculture is, and will likely remain, a targeted business for audits and compliance actions.  Full compliance is the beginning of the job of protecting yourself and your business but perfect (yes perfect, or as close to perfect as any human system can get) is the too often neglected 'rest of the story.' your business depends on both components, full compliance with the spirit of the laws and regulations will not fully protect you if you cannot show proper and complete documentation.

Read more: DOL Inspections and Audit Guidances

Time to Prepare: Pre-Season Compliance Checklist

by: Chris Schulte of CJ-Lake, LLC

Spring is right around the corner, but before your seasonal workers arrive and planting kicks into high gear, now is the perfect time to do a self-check of your HR procedures and records. While there is still snow on the ground for most of the country, take the opportunity to improve your practices and avoid costly audit findings down the road. Know the law, follow the rules, and be able to prove it.

Read more: Pre-Season Compliance Checklist

CA Controller Jumps on "Wage Theft" Bandwagon

State Controller John Chiang, who is seeking election on November 4 as California State Treasurer, announced a new pilot program on October 23 -- called "Operation Pay-Up" -- to aid victims of putative "wage theft" committed by employers. Working in conjunction with the state Labor Commissioner's Office and non-profit The Wage Justice Center, the Controller's pilot project addresses the growing number of low-income workers who are owed millions of dollars in back wages unlawfully withheld by exploitive businesses. Between 2008 and 2011 alone, the magnitude of the problem was an estimated $390 million.

Read more: CA Controller Jumps on Wage Theft Bandwagon

IRS Bars Employers From Dumping Workers on Exchanges

From the New York Times, May 26, 2014:

WASHINGTON — Many employers had thought they could shift health costs to the government by sending their employees to a health insurance exchange with a tax-free contribution of cash to help pay premiums, but the Obama administration has squelched the idea in a new ruling. Such arrangements do not satisfy the health care law, the administration said, and employers may be subject to a tax penalty of $100 a day — or $36,500 a year — for each employee who goes into the individual marketplace.

Read more: IRS Bars Employers From Dumping Workers on Exchanges

Department of Rehabilitation Releases DVDs to Train Employers Regarding Employees with Disabilities

The California Department of Rehabilitation, in partnership with the Department of Fair Employment and Housing and others, recently released two new DVDs designed to (1) assist employers recruit, hire, and retain employees with disabilities and (2) provide small business owners with helpful tips on welcoming customers with disabilities.

Read more: EDD DVDs for Training Disabilities