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Wage And Hour: Piece-Rate Payment Problems

| May 3, 2013 | minimum wage violation, Practice Areas |

In Gonzalez v. Downtown La Motors, LP, the court tackled an interesting wage and hour claim. In this case, the employer compensated its automotive service technicians on a “piece-rate” basis for repair work and ensured that a technician’s total compensation for a pay period never fell below what the employer called the “minimum wage floor” — the total number of hours the technician worked for the pay period (including hours spent waiting for repair work or performing non-repair tasks), multiplied by the applicable minimum wage rate. If it fell below the minimum wage floor, the employer supplemented a technician’s pay, to cover any shortfall between the technician’s piece-rate wages and the minimum wage floor.

In this wage and hour class action, the court was faced with the question of whether the employer must also pay those technicians a separate hourly minimum wage for time spent during their work shifts waiting for vehicles to repair or performing other non-repair tasks directed by the employer.

The Court laid out the facts of this pay system as follows:

DTLA compensates its service technicians on a piece-rate basis, which differs from an hourly wage method in that technicians are paid primarily on the basis of repair tasks completed. Under DTLA’s piece-rate system, technicians are paid a flat rate ranging from $17 to $32, depending on the technician’s experience, for each “flag hour” a technician accrues. Flag hours are assigned by Mercedes-Benz to every task that a technician performs on a Mercedes-Benz automobile and are intended to correspond to the actual amount of time a technician would need to perform the task. A DTLA technician who completes a repair task accrues the number of flag hours that Mercedes-Benz assigns to that task, regardless of how long the technician actually took to complete it. DTLA technicians accrue flag hours only when working on a repair order.

DTLA calculates its technicians’ pay for an 80-hour pay period by multiplying flag hours accrued during that pay period by the technician’s applicable flat rate. For example, a technician with a flat rate of $26 who accrued 150 flag hours in a pay period would earn 150 × $26 or $3,900.

In addition to tracking a technician’s flag hours, DTLA also keeps track of all the time a technician spends at the work site whether or not the technician is working on a repair order. At the end of each pay period, DTLA calculates how much each technician would earn if paid an amount equal to his total recorded hours “on the clock” multiplied by the applicable minimum wage. DTLA refers to this amount as the “minimum wage floor.” If a technician’s flat rate/flag hour pay falls short of the minimum wage floor, DTLA supplements the technician’s pay in the amount of the shortfall.

In this case, all the Plaintiffs worked eight-hour shifts, during which he employees were required to remain on site at the employer’s place of business. The employee technicians needed to clock in when they got to work, clock in and out for meal breaks, and clock out at the end of their shift. Similarly, the employees had to get permission to leave during a shift if they were not working on a repair order.

Although the employee technicians regularly did not have repair work to do because there were not enough vehicles to service, they were required to remain at work, and “those who asked to leave early were told that they needed to stay because customers might come in.” The employee technicians accrued no flag hours while waiting for cars needing repair. While waiting for repair work, employee technicians “were expected to perform various non-repair tasks, including obtaining parts, cleaning their work stations, attending meetings, traveling to other locations to pick up and return cars, reviewing service bulletins, and participating in on-line training.” No flag hours were accrued while performing such non-repair tasks.

The Court of Appeals affirmed the trial court’s holding that the employer’s method of compensation violated the minimum wage law because the law does not allow an employer to avoid paying its employees for all hours worked by averaging total compensation over total hours worked in a given pay period.

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