A recent California Court of Appeal decision upheld the state’s complex rules for compensating piece-rate employees. In Nisei Farmers League v. California Labor & Workforce Dev. Agency, 2019 Cal.App. LEXIS 10 (Cal.Ct.App. Jan. 4, 2019), the Court held that the Labor Code’s requirement that piece-rate employees be separately compensated for “nonproductive time” was not unconstitutionally vague. With California’s “productive vs. non-productive time” rubric firmly in place, employers must take great care to track and compensate piece-rate employees’ time, or face stiff penalties.
What Does “Piece-Rate” Mean, And Why Might An Employer Chose It?
Piece-rate compensation plans are very popular in some industries. They can incentivize employee productivity, while giving an employer greater control over labor costs. Under a piece-rate compensation system, the worker is paid a fixed amount of money for each unit produced or action performed, regardless of the number of hours worked. Industries that pay employees on a piece-rate basis include: