A California Court of Appeals has put another nail in the coffin for piece rate systems in California. Bluford v. Safeway Stores, Inc. (5/24/2013) ruled California employers are “required to separately compensate for rest periods” and cannot compensate for them by including them in a piece rate.
Safeway’s Mileage Based Piece Rate System
Safeway paid its delivery drivers based on miles driven and the performance of specific tasks, but did not account for rest periods or provide an ability to be paid for them. The employee driver claimed this violated California rest period law. Safeway claimed pay for rest periods was included as part of the piece rate paid for miles driven.
The Court of Appeals agreed with the driver. It then required the trial court to certify a class for rest period violations because Safeway had a uniform policy that violated California wage law because it was based solely on miles driven and did not separately compensate for rest periods. Safeway asserted the law does not require employers who use a piece rate system to have their employees separately clock in to be paid for their rest periods. The Bluford Court said it does.
California Case Law In Armenta Extended Again
Bluford relied on the “rule of Armenta” to reach its conclusion. Armenta v. Osmose, Inc., 135 Cal.App.4th 314 (2005) is a case that other recent California and federal courts have relied on in invaliding piece rate compensation systems.
The problem is Armenta did not involve piece rate compensation at all but involved hourly paid employees only. The Armenta “rule” says an employer cannot “average” non-paid hours worked and hours worked at an hourly rate greater than minimum wage to meet the California minimum wage obligation, a conclusion that is unremarkable. But in a piece rate system the issue is not “averaging” of hourly rates. Instead, the issue is whether the California minimum wage obligation is met by an employer paying the greater of the piece rate versus actual hours worked at the minimum wage. By definition a piece rate is not an hourly rate.
Thus under Bluford and Gonzales v. Downtown LA Motors, LP (3/6/2013) (for a post on Downtown LA Motors see Piece Rate Compensation Plans Under Fire) not only does a California employer using a piece rate system have to pay the piece rate, it 1) must compensate for all non-piece rate hours worked at minimum wage (Downtown LA Motors) and 2) must have employees clock in for their 10 minute rest periods or otherwise keep track of and separately compensate them for their rest periods (Bluford). This defeats the point of a piece rate and, if true, there will be no more piece rate compensation plans in California.
Both cases have been appealed. For California employers stay tuned. Perhaps the California Supreme Court will see the issue differently.