In Gonzalez v. Downtown LA Motors, a group of car repair technicians who were paid on a piece-rate basis brought a class action to recover unpaid minimum wages for the time they spent waiting between repairs. They claimed that because they had to remain near the shop during their shifts so that they would be available when cars arrived for repairs, they should be paid for that time.
The employer argued it had paid enough because each technician’s total pay, on average, always met or exceeded the minimum wage. The employer would calculate the total hours each technician worked each pay period—including hours spent waiting for repair work or performing other tasks covered by the piece-rate—and then multiplied this total by the minimum wage. The employer would supplement the technician’s pay to cover any shortfall.
What did the Court do? The Court disagreed with this calculation. It awarded $1.5 million to the class in minimum wages for their downtime and another $237,840 in penalties for a willful failure to pay wages. The Court of Appeal affirmed and in doing so, extended the reasoning of a 2005 decision, Armenta v. Osmose, Inc., which involved hourly maintenance workers servicing utility poles in remote locations who were paid for “productive” hours, but not for hours considered “nonproductive”—such as travel time. The employer in Armenta argued, much like in Gonzalez, there was no violation because total pay exceeded the total hours worked (both paid and unpaid) times the minimum wage. But the Armenta Court ruled that California law doesn’t allow averaging total compensation over the total hours worked in a given pay period to meet minimum-wage requirements. California minimum wage applies separately to each hour worked.
The Gonzalez Court applied Armenta’s reasoning to the piece-rate context on the theory that because the technicians were under their employer’s control for their entire shift—whether or not they were actually performing repairs—all hours of the shift were compensable. Therefore, because the technicians were paid piece-rates for only the time spent on repair work, the employer had failed to pay the minimum wage for each of the remaining hours.
So What Now? Gonzalez is a case of first impression, but employers should be aware that it may signal a trend. A federal district court, in Balasanyan v. Nordstrom, also recently applied similar reasoning to commissioned employees. In both Gonzalez and Armenta we expect the losing employers to seek further judicial review, but for now, employers paying on a piece-rate or commission basis must consider revamping their pay systems to separately pay the minimum wage rate for hours during which employees are subject to the employer’s control and not earning a piece rate or commission.
A more detailed look on Gonzalez can be found here.