Question

What are my rights under my employer’s piece-rate or commission compensation plan in California?

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Answer

When you are paid on a “commission” or “piece rate” compensation plan, this means that your pay is based on completing a particular task or making a particular item. For example, piece rate employees can include drivers paid by the mile, carpenters paid by the foot on framing jobs, and mechanics or technicians paid by the job.

However, many employers who compensate their employees according to a piece rate formula fail to fully comply with California law. Common violations include failure to pay premium wages for overtime hours, failure to pay a separate minimum wage for all hours worked on nonproductive time (i.e. for tasks not directly involved with the piece rate task such as meetings, cleaning, downtime and/or non-sales time), as well as not paying a separate wage for off duty rest breaks.

Employees who are paid on a piece rate basis are entitled to premium pay for overtime. In other words, an employee who works over eight hours in a day or over 40 hours in a week is entitled to 1.5 times his/her regular rate of pay for this overtime. The regular rate of pay for piece rate work is generally calculated by taking the total compensation paid during a week and dividing it by the total number of hours worked in that week.

Another common mistake of piece rate employers is failure to pay a separate wage for all time that employees are subject to the employer’s control. Earlier this year, a new section (226.2) of the California Labor Code was enacted. Labor Code §226.2 requires separate hourly pay for rest breaks and “nonproductive” time worked under a piece rate compensation system.

Specifically, Labor Code §226.2 provides for the following:

Employees must be separately compensated for rest breaks and other “nonproductive time,” and

 - Employees’ wage statements must include the employees’ total hours of compensable rest and recovery breaks, the rate of pay for those breaks, and the gross wages paid for those breaks during the pay period.

 - Labor Code §226.2 provides that rest periods and other nonproductive time must be compensated at an hourly rate no less than the applicable minimum wage.

These are just a few of the compensation issues that are unique to piece rate or commission employees. If you have questions regarding your piece rate or commission pay, you should contact my firm to discuss.

Answered 01/23/2017

Disclaimer: This answer was provided by an attorney selected to Super Lawyers, and is intended to be an educated opinion only. This answer should not be relied upon as legal advice, nor construed as a form of attorney-client relationship.

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