New Labor Code Section 226.2 Creates Safe Harbor for Employers Who Have Not Compensated Piece Rate Workers Separately for Non-Productive Time

In Gonzalez v. Downtown LA Motors, LP (2013) 215 Cal.App.4th 36 (discussed here), the Court of Appeal held that an auto repair shop that paid its repair technicians on a piece rate basis (paying per job done, rather than per hour worked) must compensate those employees separately for their non-productive time (time spent waiting for the next repair job or doing other non-repair tasks directed by the employer). In Bluford v. Safeway Stores, Inc. (2013) 216 Cal. App. 4th 864 (discussed here), the Court held that employers also must compensate their piece rate workers separately for their rest period time. (Unlike meal period time, which is non-compensable time off the clock, rest period time is compensable time on the clock.)

On October 10, 2015, Governor Brown signed legislation enacting Labor Code section 226.2, which provides a safe harbor to employers who have not complied with these requirements in the past. As stated in Legislative Counsel's Digest:

Existing law prohibits an employer from requiring an employee to work during any meal or rest or recovery period mandated by an applicable statute or specified regulation, standard, or order, establishes penalties for an employer’s failure to provide a mandated meal or rest or recovery period, and requires rest or recovery periods to be counted as hours worked. Existing law establishes the Division of Labor Standards Enforcement in the Department of Industrial Relations for the enforcement of labor laws, including laws related to wage claims. Existing law requires every employer, semimonthly or at the time of each payment of wages, to furnish each employee with an accurate itemized statement in writing showing specified information. A knowing and intentional violation of this provision by an employer is a misdemeanor, as specified. 

This bill would require the itemized statement provided to employees compensated on a piece-rate basis 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, and the total hours of other nonproductive time, as specified, the rate of compensation, and the gross wages paid for that time during the pay period. The bill would require those employees to be compensated for rest and recovery periods and other nonproductive time at or above specified minimum hourly rates, separately from any piece-rate compensation. The bill would define “other nonproductive time” for purposes of these provisions to mean time under the employer’s control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis. Because a knowing and intentional violation of these requirements would be a crime, the bill would impose a state-mandated local program. 

The bill, until January 1, 2021, would provide that an employer shall have an affirmative defense to any claim or cause of action for recovery of wages, damages, liquidated damages, statutory penalties, or civil penalties based solely on the employer’s failure to timely pay the employee the compensation due for rest and recovery periods and other nonproductive time for time periods prior to and including December 31, 2015, if, by no later than December 15, 2016, the employer complies with specified requirements, subject to specified exceptions.

Legislative Counsel's Digest is available here.