Update: In April we reported on a California appellate court decision, Gonzales v. Downtown LA Motors, which held that an employer paying on a piece-rate basis must pay a separate “hourly” rate for time spent waiting between compensable piece-rate tasks. The California Supreme Court recently denied review in Gonzalez v. Downtown LA Motors. If you are wondering what this means for employers, please read on.
First, remind me, what was the holding in Gonzales? Gonzalez involved a class of car repair technicians who were paid on a per-repair basis. The technicians brought a class action to recover unpaid minimum wages for the time they spent waiting between repairs and the time they spent performing other non-repair duties. They claimed that because they had to remain near the shop during their shifts (so they would be available when cars arrived for repairs), they should be paid for that time. The Court of Appeal agreed with the repair technicians, even though the employer had made sure that each technician’s total pay, on average, always met or exceeded the minimum wage.
Gonzalez represents a tenuous extension of the already troubling holding of the same appellate court in Armenta v. Osmose (Cal. App. 2005). Armenta held that California law does not allow averaging total compensation over the total hours worked in a given pay period to meet minimum-wage requirements, because, according to Armenta, California minimum wage applies separately to each hour worked. Gonzalez makes things worse by extending Armenta’s questionable rationale to piece-rate compensation plans.
So what does Gonzales mean for employers? Although both Gonzales and Armenta were decided by the same court (one of six district courts of appeal) and may not be the last word on the subject, several recent decisions have reached similar conclusions regarding piece-rate pay. For example, a federal district court, in Balasanyan v. Nordstrom, applied similar reasoning to a commission compensation plan.
Although other district courts of appeal may reach different conclusions, and although the California Supreme Court may eventually weigh in on the subject, for now Gonzales can be cited as binding precedent. Thus, employers should carefully examine their piece-rate compensation plans and the facts of the recent piece-rate cases to determine whether there is a potential argument that certain tasks performed by their workers are not fully covered by their piece-rate plan. If there is an argument that certain tasks are not completely covered by the piece-rate plan, then employers may want to reduce the risk of a potential lawsuit by restructuring their compensation plans.
Employers should also continue to closely watch subsequent cases involving piece-rate compensation plans in the event a split of authority develops among California’s appellate courts. Although the California Supreme Court chose not to review the Gonzales case, the issue of what may be compensated as part of a piece-rate compensation plan and what must be separately compensated is still in flux and may eventually make its way to the California Supreme Court.