Like all compensation methods, piece rate compensation plans – under which an employee is compensated based on the number of “pieces” he or she generates or completes – must be analyzed for wage-and-hour compliance. For example, under federal law, minimum wage generally is due for all hours worked, and there are recordkeeping obligations, although some piece rate plans may qualify for the section 7(i) overtime exemption. Under state law, employers also must analyze whether piece rate employees’ compensation meets all applicable requirements, which supplement FLSA requirements for most employers. A new decision from Washington state’s highest court reinforces this last principle and imposes further payment obligations on certain Washington employers. Demetrio v. Sakuma Bros. Farms, Inc., 2015 Wash. LEXIS 807 (Wash. July 16, 2015).
Demetrio concerned the unique agricultural rest break requirement of WAC 296-131-020(2), requiring that “[e]very employee . . . be allowed a rest period of at least ten minutes, on the employer’s time, in each four-hour period of employment.” (Emphasis added.) Plaintiffs were seasonal workers who picked berries on Defendant’s berry farm under a piece rate system of compensation, i.e., Defendant paid them “an amount per pound or per box of fruit harvested.” Plaintiffs argued that Defendant’s pay system “deprived them of paid rest breaks required by WAC 296-131-020(2)” because the phrase “on the employer’s time” required Defendant to “pay a wage separate from the piece rate for the 10-minute period they are on break, since no piece rate wages accumulate during that time.” Defendant urged that it had “set the piece rate with rest periods in mind and that breaks are therefore ‘on the employer’s time’” as required by the regulation.
The Court noted that actually taking rest breaks is the goal of the regulation, to mitigate the dangers of allowing agricultural work – “one of the most dangerous industries in America” – by allowing employees like the Plaintiffs to actually sit, cool down, and rehydrate. The Court expressed concern that permitting a piece rate to compensate the employees for rest periods as well as productive work incentivized employees to work through rest breaks to increase their earnings, undermining the purpose of the regulation. The Court also ruled that the rest periods must be compensated at what it termed the piece worker’s regular rate of pay or the applicable minimum wage, whichever is greater. In this context, the Court instructed affected employers to compute the pieceworker’s regular rate of pay for rest break compensation by dividing the total piece rate compensation for the workweek by the total hours worked excluding the required rest break time. (The Court contrasted this computation for rest break compliance purposes with the computation needed to assess minimum wage compliance, expressly noting that the paid rest break time is included in the denominator when the question is minimum wage compliance.)
Demetrio points up the detailed nature of some state law rules, and the need to review compensation plans for compliance therewith. California law imposes a similar requirement for piece rate workers.