2 and sets forth requirements for the payment of a separate hourly wage for “nonproductive” time worked by piece-rate employees, and separate payment for rest and recovery periods to those employees. The legislation builds on California appellate court decisions in Gonzales v. Downtown LA Motors, 215 Cal. App. 4th 36 (2d App. Dist. Mar. 6, 2013) and Bluford v. Safeway, Inc., 216 Cal. App. 4th 864 (3d App. Dist. May 8, 2013). The law has profound implications for employers, including agricultural and transportation companies, which historically compensate employees based on piece-rate and activity-based formulas.

f the TCP’s legality, the trial court determined that the TCP was legal because all work hours (including rest breaks) were paid at a rate that exceeded the statutory minimum wage, and the increased rates were not averaged to make up for unpaid time, but rather were averaged over all hours and paid in lieu of the base hourly rate only when those increased rates exceeded the base hourly rate.Court’s Decision: The California Court of Appeal affirmed, rejecting plaintiffs’ attempt to analogize this case to unlawful compensation structures where employers failed to pay employees an hourly rate for nonproductive time or rest breaks, and instead only looked to the total pay at the end of the pay period to make sure the total was equal to or greater than the amount employees would have been paid if they had received the minimum wage rate for all hours. SeeArmenta v. Osmose, Inc., 135 Cal. App. 4th 314, 37 Cal. Rptr. 3d 460 (2005) (hourly compensation system that included off-the-clock work); Gonzalez v. Downtown LA Motors, LP, 215 Cal. App. 4th 36, 155 Cal. Rptr. 3d 18 (2013) (piece rate compensation system that did not pay an hourly rate for unproductive time); Bluford v. Safeway Stores, Inc., 216 Cal. App. 4th 864, 157 Cal. Rptr. 3d 212 (2013) (piece rate compensation system that did not pay an hourly rate for rest breaks); and Vaquero v. Stoneledge Furniture LLC, 9 Cal. App. 5th 98, 214 Cal. Rptr. 3d 661 (2017) (commission-based compensation system that did not pay an hourly rate for rest breaks). Unlike the compensation structures in Armenta, Gonzalez, Bluford and Vaquero, defendant paid its technicians at least the statutory minimum wage for all hours worked, including time spent on rest breaks.Practical Implications: Employers are not prohibited from crafting creative and innovative incentive compensation systems for their employees.

Courts reasoned that these plans violate California law because they do not separately compensate employees for each hour worked, such as time spent performing non-commission or non-piece-rate earning tasks (e.g., waiting for work, cleaning, attending meetings, etc.). See, e.g., Vaquero v. Stoneledge Furniture LLC, 9 Cal. App. 5th 98 (2017); Gonzalez v. Downtown LA Motors, LP, 215 Cal. App. 4th 36 (2013). However, the California Court of Appeal recently gave its stamp of approval to a variable hourly-based compensation system that could permit employers to closely approximate the wages paid using traditional commission/piece rate plans while complying with California law.

(3) Does the Armenta/Gonzalez bar on averaging wages apply to a pay formula that generally awards credit for all hours on duty, but which, in certain situations resulting in higher pay, does not award credit for all hours on duty? See Gonzalez v. Downtown LA Motors, LP, 155 Cal Rptr. 3d 18, 20 (Ct. App. 2013); Armenta v. Osmose, Inc., 37 Cal. Rptr. 3d 460, 468 (Ct. App. 2005).Employer Takeaways While the California Supreme Court is considering these questions, out-of-state employers with employees who work at least some of the time in California should carefully consider whether to comply with California’s labor and employment requirements.

The primary effect of Section 226.2 is to require that California employees paid in whole or in part on a piece-rate basis be paid for “rest and recovery periods” and “other nonproductive time” on a separate, hourly basis at specified, differing hourly rates. AB 1513 was passed in the wake of two California Courts of Appeal decisions regarding piece-rate pay: Gonzalez v. Downtown LA Motors, LP, 215 Cal. App. 4th 36 (2013) (Gonzalez), and Bluford v. Safeway Stores, Inc., 216 Cal. App. 4th 864 (2013) (Bluford). While those decisions were based on their own unique facts, the California state legislature appears to have read them broadly to require separate hourly pay for rest and recovery periods and so-called “nonproductive time” for any employees paid on a piece-rate basis.

2 to the Labor Code relating to piece-rate compensation. This new section significantly changes the requirements governing the payment of piece-rate compensation and codifies rulings in some recent California court cases, including Gonzalez v. Downtown LA Motors, 215 Cal.App.4th 36 (2013), and Bluford v. Safeway Stores, Inc., 216 Cal.App.4th 864 (2013). First, AB 1513 requires the payment of a separate hourly wage for rest and recovery periods and for “other nonproductive time” worked by piece-rate employees, at the rates set forth by the statute.

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.

AB 1513, which becomes effective on Jan. 1, 2016, requires the itemized statement to also separately state: the total hours of compensable rest and recovery periods, the rate of compensation, and the gross wages paid for those periods during the pay period; andthe total hours of other nonproductive time, the rate of compensation, and the gross wages paid for that time during the pay period.In effect, AB 1513 codifies the decisions in Gonzalez v. Downtown LA Motors, 215 Cal. App. 4th 36 (2013) and Bluford v. Safeway, Inc., 216 Cal. App. 4th 864 (2013), which require employers to pay piece-rate employees for rest period, recovery periods, and all other periods of “nonproductive” time separately from and in addition to their piece-rate compensation Employers that do not pay a separate hourly rate for all hours worked (in addition to piece-rate wages), must also list the total hours of other non-productive time, the rate of compensation for that time, and the gross wages paid for that time during the pay period. Although AB 1513 codifies additional requirements for employers who pay their employees on a piece-rate basis, it also offers some relief to those same employers.

Train HR, payroll, and managerial employees on increases, posting, and notice requirements, and how to respond to employee inquiries concerning wage rate changes. If a third-party payroll processor is used, confirm it is aware of changes and has updated systems accordingly.1See., e.g., Armenta v. Osmose, Inc., 135 Cal. App. 4th 314 (2005).2See, e.g., Gonzalez v. Downtown LA Motors, LP, 215 Cal. App. 4th 36 (2013), Bluford v. Safeway Inc., 216 Cal. App. 4th 8642013), Balasanyan v. Nordstrom, Inc., 913 F. Supp. 2d 1001 (S.D. Cal. 2012)329 U.S.C. § 207(i).4See, e.g., Alaska (Alaska Stat.

Some employers such as wholesalers and financial institutions, are not considered "retail" in nature and will be unable to establish the exemption under federal law. The decision in Gonzalez v. Downtown LA Motors, 215 Cal.App.4th 36 (2013), indicates that employees compensated on an incentive basis (piece rate or commission) must be paid separately for any hours in which they are prevented from earning incentive pay, at the minimum wage or higher. Therefore, employers will want to ensure that they separately compensate commissioned salespersons for time spent in meetings, rest breaks, and other tasks not directly related to sales activities.