AB 1413: Protecting piece-rate workers

For decades, piece-rate employers in agriculture, trucking, and many other industries have paid employees based on productivity - per box picked, mileage driven, cars repaired, and the like. To ensure the minimum wage for all hours worked was achieved, employers divided hours worked into wage paid, making up any difference. In two ground-breaking decisions, California appellate courts held for the first time that piece-rate workers must be paid separately for rest and recovery time (Bluford v. Safeway) and for other non-productive time (NPT) such as substantial waiting for work paid at a piece-rate to commence (Gonzalez v. Downtown Motors) notwithstanding gross compensation paid well in excess of minimum wage.

These decisions created massive retroactive liability in the billions of dollars for California employers. Failure to pay wages properly, even if entirely innocent, can be 15 to 20 times the wage itself. In one case, the plaintiff counsel sought for three workers $300 in unpaid rest and an additional $4,500 in penalties. A second critical issue in the wake of the Gonzalez case was chaos as to the definition of NPT. Thus, some workers were contending that, while harvesting, the several seconds that they pause while the tractor turns around at the end of a row had to be separately compensated.

After extensive negotiations piloted by the California Labor & Workforce Development Agency, and including representatives of unions and employers, a comprehensive piece-rate bill, Assembly Bill 1513, was enacted (Labor Code Section 226.2). The new law has both retroactive and a prospective remedies and provisions.

First, the bill provides a safe harbor for eligible employers. Employers who elect to pay a specified fixed payment to their workers for periods worked at a piece rate between July 2012 and the present are insulated from penalties and from further retroactive liability and litigation. Depending upon the number of employers who opt in, it is estimated that hundreds of millions of dollars will be paid out to millions of employees across the state. The legislation provides to eligible employers who make the payment an affirmative defense to all retroactive claims for failure to pay separately for rest and NPT.

The legislation also includes for the first time a definition of NPT that will be a guide post or touchstone going forward. The statute provides that "other non-productive time means time under the employer's control, exclusive of rest and recovery periods, that is not directly related to the activity being paid on a piece-rate basis." Thus, time while the harvesting machine turns or walking to the next field should not require separate compensation. The legislation also provides options for piece-rate employers to calculate NPT including reasonable estimates or simply paying at least the minimum wage for every hour worked plus the piece-rate pay. The statute does not define or purport to define what is or is not a "piece-rate system."

Finally, the statute resolves litigation and uncertainty as to the required rate of pay for rest periods. Prospectively, that pay will be based on the average pay received by the employee in any week which included work paid on a piece-rate. The Bluford case, by its language, seemed to indicate that rest period pay need only be compensated at minimum wage or a higher contractually agreed rate. Employers will be required to report their rest pay calculation based on weekly average pay.

Marty Glick is a litigator at Arnold & Porter LLP and was an employer representative in the discussions that led to the proposal enacted in AB 1513.