On October 10, 2015, Governor Jerry Brown signed AB 1513 into law creating a new California Labor Code § 226.2 (effective January 1, 2016), which rewrites and redefines the rules governing piece-rate compensation in California.
Section 226.2 codifies the California Courts of Appeal decisions in Gonzalez v. Downtown LA Motors, 215 Cal.App.4th 36 (2013) and Bluford v. Safeway Stores, Inc., 216 Cal.App.4th 864 (2013) and answers some important questions left open by these decisions. Although primarily negotiated by agricultural interests, section 226.2 applies to all piece-rate compensation plans, including the auto industry. Therefore, auto dealers paying on a piece-rate basis must:
1. Separately compensate employees for time spent taking rest breaks.
2. Separately compensate employees for “other nonproductive time.”
3. Provide additional relevant information on required wage statements.
Now is the best time for California auto dealers to re-check their pay plans, employee manuals and wage statements. Although many auto dealers have adjusted their practices after the Downtown LA Motors and Bluford decisions, California's new labor code section answers important questions left open by these decisions as discussed in this article.
In addition, the new law does provide an affirmative defense for failure to compensate piece-rate workers for rest and recovery periods - if the employer satisfies the following requirements by December 15, 2016:
In light of Labor Code § 226.2, all employers paying employees on a piece-rate basis may want to consider paying them the minimum wage for all hours worked and use activity-based bonuses. Effective January 1, 2016, California's minimum wage increases to $10.00/hour. Importantly, the new legislation does not impact or change overtime rules and requirements to provide meal breaks and rest breaks.
We will continue to monitor California legislation and labor law developments. If you have any questions, please feel free to contact your Thompson Coburn attorney, the authors of this alert, or any member of Thompson Coburn's labor and automotive practice groups.
John Viola is a partner in Thompson Coburn's Labor & Employment group. He can be reached at 310-282-9407.