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How Is Overtime Calculated For Piece Rate Workers?

| Mar 22, 2019 | Areas of Practice, minimum wage violation, overtime time violation |

Top Wage and Hour Attorney Answers: What can I do if I’m working a lot of hours but not getting paid minimum wage as a piece-rate employee? How can I make sure my boss isn’t cheating me out of money that I’m owed as per-piece paid employee? Can piece-rate settlements be worth a lot of money and how do I find the best wage theft lawyer to take the case?

Most people are familiar with minimum wage jobs and how their paychecks are calculated using a standard hourly rate arrangement as well as being paid time and a half for overtime hours. However, not many people know how piece rate pay works unless they are an employment attorney, or a piece rate pay worker. Before I took my first employment law class in law school, I had never heard of piece rate pay. As our wage and hour attorneys have previously blogged about, there are a lot of complexities that impact piece rate employees, who can also be referred to as piece pay workers or per-piece compensation employees. (See Does My Employer Have To Pay Me Overtime If I’m Being Paid At A Piece-Rate?).

A piece rate employee is a different way to pay employees. Most employees are paid by the hour, some employers still pay their workers based on the amount of work they complete in a given work day. In other words, the piece rate worker is paid a certain rate for each piece of work they complete. Employers and employees typically have an arrangement for how to judge quality of work, and how many “pieces” the employee must complete per day. It all varies depending upon what is produced and how long it may take to produce. Some common examples of piece rate workers are: technician paid by the number of telephone lines installed, a mechanic who is paid per tune-up completed, or a factory worker paid for each product assembled. Employers like this system when their profit is based on being paid for each job or piece because it lets them fix the cost for providing each job or piece.

Piece pay may be more common than you think. Many labor-intensive jobs still use piece pay to calculate each employee’s money earned. Sounds good in theory, right? Well there’s a lot of different ways that employers can take advantage of this pay scheme. I always learned best through examples, so here’s a brief hypothetical from our wage theft lawyers. Tim’s job is to install insulation into homes, hotels, etc., Tim agreed with his boss that for every ten feet of insulation that he installs, he will be paid $20. Tim is excited by this, because Tim knows that he can install insulation faster and more efficiently than anyone else. In this hypothetical, Tim stands to make a decent amount of money, potentially, more money than his co-workers. For every ten feet of insulation that Tim installs, he’s paid $20. That’s the basic idea.

When done right, and properly managed, piece-rate pay can result in larger wages, and increased productivity. Where employers tend to take advantage of this set up is by cheating their employees out of overtime wages or paying them less than minimum wage. Piece pay employees are protected under state and federal law, just like any other hourly wage employee. Employers must pay at least minimum wage to employees regardless of whether they are a piece pay or hourly employee. The Fair Labor Standards Act (“FLSA”) requires that the rate of pay for a work week be at least equal to minimum wage. The way this is calculated is pretty simple. Our wage and hour attorneys recommend that each piece-pay employee keep track of their own hours at home to ensure they are not being shorted. To calculate if your boss is violating FLSA, first add all of the hours you worked for the week. Next, take the amount of money that you were paid for that week and then divide it by the total hours you worked.

In order to best understand how piece rate work can go wrong for the employees, let’s go back to Tim to work through a few hypothetical scenarios. For example, let’s say that Tim makes $500 and works 40 hours in the workweek based on his typical piece rate production of laying insulation. For this particular week, Tim makes $12.50 per hour ($500 ÷ 40 = 12.50). If Tim had actually worked 37 hours, the $500 would have been divided by 37. In Ohio, minimum wage is $8.55, so Tim’s employer is following FLSA because Tim makes well over minimum wage. Let’s change this hypothetical a little. Tim is training a new employee, Mark. Mark is not as fast or as efficient as Tim. For the first few weeks of work Mark only takes home $300 per week. It’s understandable that Mark takes home less because he’s still learning. However, Mark’s hourly wage is only $7.50 per hour ($300 ÷ 40 = $7.50). Also, $7.50 is well below minimum wage in Ohio. Mark’s boss must make up the difference to ensure that he’s making at least minimum wage. For a 40-hour work week, Mark would have made $342. An extra $42 may not seem like a lot, but that adds up over time. This problem arises in a variety of circumstances. Let’s say that Tim is paid a lower piece rate that typically will work out to just above minimum wage per hour when everything is going well, but often the company that he works for delays in delivering the installation to the job site and requires that Tim stay on site to wait for it. During the most weeks, Tim spends five to six cumulative hours waiting for insulation, which means that he is not being paid at all for this time. Because these five to six hours need to be counted in his weekly hours, it drops his hourly rate under minimum wage and this becomes unlawful under the FLSA. Tim is owed overtime pay from his employers. This type of problem also applies to piece rate employees that have regular waits for bad weather delays.

Now, let’s have some fun and talk about what happens when piece rate employees work overtime hours. Many employers will completely disregard the number of hours that a piece rate worker works, figuring that the number of hours worked is irrelevant because the employees are being paid per piece, not hours worked. Some employers are genuinely confused, while other bosses and managers simply seek to take advantage of hard-working piece rate employees. The truth is that piece rate employees should keep a careful log of how many hours they work each day because just like any other employee, piece rate workers are entitled to time and a half pay once they hit 40 hours in a workweek. Unfortunately, it’s still very common for bosses to try to rip off piece pay employees and not pay them overtime.

So, how exactly is overtime pay calculated when the employee does not have a set hourly pay rate? First, the employer must establish a standard workweek, which must be seven consecutive days, but start on any day of the week. Second, the employer is responsible for keeping track of the hours worked by each employee during that week –the employer is liable if the hours are not kept and cannot push that blame onto the employee. (With that being said, the employee should keep track of his or her hours worked for his or her own records). Third, to establish a piece-rate employee’s regular rate of pay, divide the total amount of pay in a particular week (not a pay period) by the number of hours worked by that employee in that same week. From there, the default calculation is that the employee is entitled to an half the rate of pay for each hour worked over 40 hours.

Let’s welcome back hypothetical Tim. Let’s say that Tim works 45 hours in a work week that is set from Monday to Sunday. Based on his production per piece, Tim earns $405. By dividing the $405 by 45 hours worked, the regular rate of pay for that week comes out to be $9 per hour. Having worked five hours of overtime, Tim, our friendly hypothetical worker, would be entitled to an additional amount of overtime pay at half the regular rate ($4.50) times the five hours of overtime worked, which calculates to an additional $22.50 for the five overtime hours. As a result, Tim should see a gross paycheck in the amount of $427.50 for that week of laying insulation.

Now, just to complicate things a little bit, there is an alternative way that overtime pay can be calculated for piece rate employees. However, this alternative method must be established by agreement before the employee does the work – it cannot be agreed to retroactively afterwards. Specifically, the employer and the employee can agree that the employee will be paid one and half times the piece rate during any hours worked passed 40 hours in the designated workweek. So, if Tim is paid $10 for every ten feet of insulation installed, he and his boss can agree to pay Tim one and half times that—or $15 per 10 feet —for insulation installed after the hard working Tim has worked 40 hours for that week.

Instead of jumping back to another wage and hour hypothetical (sorry Tim), our employment law attorneys are going to use a recent case out of California that reaffirms that piece rate employees are entitled to overtime and minimum wage.

Truck drivers for Frito Law sued the chip company for not paying at least minimum wage and because Frito Lay didn’t provide their truckers with required meal and rest periods. In total, there are 254 truckers suing Frito Lay. The truckers say that they agreed to work on a piece rate system based on activities such as mileage and number of cases of product at predetermined rates.

One of the biggest (and most common) offenses that Frito committed was not paying their drivers for wait time. According to the drivers, it was common that when the drivers reported to work in the morning, they would have to wait, at times, two or more hours for their trucks to be loaded and ready for delivery. The big problem with this is that Frito never paid their truckers for this wait time. As our wage theft lawyers discussed above, this is clear violation of FLSA.

But of course, it only gets worse. The truck drivers were held to incredibly high standards. They constantly had to inspect their equipment and truck both before the start of their shift and after. This required the drivers to fill out mandatory paperwork, which, as you can imagine, took a great deal of time. On top of that the drivers had to wash their trucks, clean them as needed, and spend time fueling the trucks. Frito did not pay their drivers for this mandatory time spent doing inspections and all of this required extra work. Indeed, the employer did not even track this time to calculate overtime pay. It’s truly amazing how such a large company can’t afford (or just refused) to pay their drivers a fair wage and compensate them for all the work they’re doing.

But there is good news in all of this. The drivers knew their rights and knew they were being shorted. They took the best course of action by getting wage and hour lawyers and filing a class action lawsuit. The case settled in 2018 for a cool $6.5 million dollars, plus attorney’s fees, costs and expenses. That’s a lot of chips. Each class member, on average, will receive roughly $18,377 from the settlement agreement.

This case is a perfect example of hard-working men and women, standing up for their rights and taking back what was stolen from them. Frito was unwilling to go to Court over this matter, because they were so clearly in the wrong. It’s insane to think that Frito was making their drivers work five hour shifts without any breaks what so ever. A $6.5 million settlement is large, but I could not even guess what it would have been, had this case gone in front of a jury. Federal law, state law and case law are unequivocally clear—when it comes to piece rate employees, they are entitled to at least minimum wage, rest breaks and lunch breaks, and compensation for time spent on the job performing other duties related to work.

Under the law, employers have a duty to keep accurate payroll records. For piece rate employees this is especially important. If an employee thinks they are being cheated, they can ask for their pay records. It’s never too late to start tracking how many hours a day a piece rate employee works. The easiest way to keep track, that our overtime law attorneys suggest is keeping a small notepad with dates and hours worked. It’s incredibly important for piece employees to keep their own logs. It takes seconds of out each day to do but could prove to be invaluable later. The hope is that piece rate employees never have to use these self-made logs, but in the off chance that they must use them, it can be a way to protect and get back thousands of hard-earned dollars.

If you even slightly have a concern that your employer is not paying you all of your wages for all of your lawfully earned overtime compensation at one and half times your normal rate as requires under the Federal Fair Labor Standards Act or Ohio Minimum Fair Wage Standards laws or you are an nonexempt employee that has been misclassified as exempt or independent contractor, contact the attorneys at The Spitz Law Firm today for a free and confidential initial consultation. The wage and hour lawyers at The Spitz Law Firm will provide you with the best options for your overtime pay dispute situation. If you even think that you may be entitled to overtime pay that you are not being paid, Call our office at 866-797-6040.

Disclaimer:

The overtime and minimum wage information provided at the top of this pay and wage and hour web page and at this employment law website are for informational purposes only and not for the purpose of providing legal advice. If you are still asking, “Am I entitled to overtime?”, “Does my employer have to pay me for weather delay on the job?” “What should I do if my paycheck is short?” or “What do I do if my company does not pay overtime?”, the your best option is to contact an Ohio overtime attorney to obtain advice with respect to potential FLSA violation, wage and hour questions or any particular employment law issue. Use and access to this employment law website or any of the links contained within the site do not create an attorney-client relationship. The legal opinions expressed at the top of this lawyer advertising page or through this employment attorney site are the opinions of the individual lawyer and may not reflect the opinions of The Spitz Law Firm, Brian Spitz, or any individual attorney.