Employees Paid on a Piece Rate Basis Must be Separately Compensated for Rest Periods

Subject to narrow exceptions, CA law requires that employers authorize and permit nonexempt employees to take a rest period that must, insofar as practicable, be taken in the middle of each work period. The rest period is based on the total hours worked daily and must be at the minimum rate of a net ten consecutive minutes for each four hour work period, or major fraction thereof. The Division of Labor Standards Enforcement (DLSE) considers anything more than two hours to be a "major fraction" of four." A rest period is not required for employees whose total daily work time is less than three and one-half hours. The rest period is counted as time worked and therefore, the employer must pay for such periods.

Safeway paid its truck drivers on a piece rate basis. Pay was based on (1) mileage rates that varied by number of miles driven, time of day, and location, (2) fixed rates for certain tasks, (3) an hourly rate for a predetermined amount of minutes for other tasks, and (4) an hourly rate for delays beyond the driver's control. Its collective bargaining agreement also provided for two rest periods for every eight or ten hour shift. The court found that even though Safeway had a policy to provide paid rest periods, under a piece-rate system rest periods must be separately compensated. By failing to compensate separately for rest periods, the court found that Safeway was essentially averaging hourly compensation and thus not in compliance with California minimum wage law. This is true even if the mileage rates and activity rates were negotiated to include payment for expected rest breaks.

This decision is important for all employers who pay at a piece rate, flat rate or other similar compensation method.  The court’s decision may also signal a problematic trend for employers who have historically relied upon “averaging” methods to compensate employees for all hours worked including rest periods.  Clients who pay employees on a piece rate or similar method must ensure that employees are separately compensated for non-piece rate time including rest periods.   Compensation plans and wage statements should also make it clear that employees are being separately compensated for this time.

Subject to narrow exceptions, CA law requires that employers authorize and permit nonexempt employees to take a rest period that must, insofar as practicable, be taken in the middle of each work period. The rest period is based on the total hours worked daily and must be at the minimum rate of a net ten consecutive minutes for each four hour work period, or major fraction thereof. The Division of Labor Standards Enforcement (DLSE) considers anything more than two hours to be a "major fraction" of four." A rest period is not required for employees whose total daily work time is less than three and one-half hours. The rest period is counted as time worked and therefore, the employer must pay for such periods.

Safeway paid its truck drivers on a piece rate basis. Pay was based on (1) mileage rates that varied by number of miles driven, time of day, and location, (2) fixed rates for certain tasks, (3) an hourly rate for a predetermined amount of minutes for other tasks, and (4) an hourly rate for delays beyond the driver's control. Its collective bargaining agreement also provided for two rest periods for every eight or ten hour shift. The court found that even though Safeway had a policy to provide paid rest periods, under a piece-rate system rest periods must be separately compensated. By failing to compensate separately for rest periods, the court found that Safeway was essentially averaging hourly compensation and thus not in compliance with California minimum wage law. This is true even if the mileage rates and activity rates were negotiated to include payment for expected rest breaks.

This decision is important for all employers who pay at a piece rate, flat rate or other similar compensation method.  The court’s decision may also signal a problematic trend for employers who have historically relied upon “averaging” methods to compensate employees for all hours worked including rest periods.  Clients who pay employees on a piece rate or similar method must ensure that employees are separately compensated for non-piece rate time including rest periods.   Compensation plans and wage statements should also make it clear that employees are being separately compensated for this time.

Subject to narrow exceptions, CA law requires that employers authorize and permit nonexempt employees to take a rest period that must, insofar as practicable, be taken in the middle of each work period. The rest period is based on the total hours worked daily and must be at the minimum rate of a net ten consecutive minutes for each four hour work period, or major fraction thereof. The Division of Labor Standards Enforcement (DLSE) considers anything more than two hours to be a "major fraction" of four." A rest period is not required for employees whose total daily work time is less than three and one-half hours. The rest period is counted as time worked and therefore, the employer must pay for such periods.

Safeway paid its truck drivers on a piece rate basis. Pay was based on (1) mileage rates that varied by number of miles driven, time of day, and location, (2) fixed rates for certain tasks, (3) an hourly rate for a predetermined amount of minutes for other tasks, and (4) an hourly rate for delays beyond the driver's control. Its collective bargaining agreement also provided for two rest periods for every eight or ten hour shift. The court found that even though Safeway had a policy to provide paid rest periods, under a piece-rate system rest periods must be separately compensated. By failing to compensate separately for rest periods, the court found that Safeway was essentially averaging hourly compensation and thus not in compliance with California minimum wage law. This is true even if the mileage rates and activity rates were negotiated to include payment for expected rest breaks.

This decision is important for all employers who pay at a piece rate, flat rate or other similar compensation method.  The court’s decision may also signal a problematic trend for employers who have historically relied upon “averaging” methods to compensate employees for all hours worked including rest periods.  Clients who pay employees on a piece rate or similar method must ensure that employees are separately compensated for non-piece rate time including rest periods.   Compensation plans and wage statements should also make it clear that employees are being separately compensated for this time.