Dear Clients, business owners and Colleagues,
I am writing to notify you that July 1, 2016 is the deadline to file a Notice of Election with the Department of Industrial Relations (DIR) concerning your (or your acquaintances’) past or current payment of piece rate to employees. The DIR permits employers who file the Notice to take advantage of the “safe harbor” option provided in recently enacted regulations pertaining to piece-rate employees. This article only applies to employers who have paid (since 2012) or currently pay piece-rate or flat rates to their employees.
Effective January 1, 2016, California law requires any employer who pays their employees “piece-rate” wages to separately compensate workers for rest breaks, recovery periods, and nonproductive time. “Nonproductive time” is defined as when an employee is subject to the employer’s control, but is not engaged in the work for which the employee is being paid on a piece-rate basis. For more information please see DLSE Information sheet.
Further, employers are required to provide itemized wage statements showing the total hours, rate of compensation, and gross wages paid for compensable rest breaks, recovery periods, and nonproductive time. Failure to comply with these new requirements would expose employers to penalties previously believed to be applicable only to hourly workers, including rest and recovery break penalties.
In addition, the Department of Labor Standards Enforcement (DSLE), and specifically, the Labor Commissioner, interpreted the new law to be retroactive, meaning employers would be liable for any time they failed to separately compensate their piece-rate workers for rest breaks, recovery periods, and nonproductive time in the past four years.
For employers who pay piece-rate wages in addition to an hourly minimum wage, the regulations mandating payment for nonproductive time do not apply. However, the law does mandate compensation for rest and recovery periods at an special hourly rate calculated to include the minimum wage and earned piece-rate wages.
The Safe Harbor Provision and the Notice of Election
Included in the new law is a safe harbor provision, which affords a one-time chance for employers to avoid statutory penalties and interest for violations occurring between July 1, 2012, and December 31, 2015. By electing to take advantage of the safe harbor option, an employer has a legal defense for any claims of non-payment of wages for rest breaks, recovery periods, and nonproductive time, including waiting time penalties, liquidated damages, and wage premiums for rest and recovery period violations. However, employers should be aware that the safe harbor provision does not apply for a failure to give or authorize rest breaks and recovery periods, failure to pay overtime, or violations that occurred after January 1, 2016.
Employers wishing to take advantage of the safe harbor provision need to satisfy two requirements:
- File a Notice of Election form with the DIR by July 1, 2016. The form may be filed electronically at https://www.dir.ca.gov/pieceratebackpayelection/piecerate.asp.
- Pay to all employees the compensation owed, if any, for unpaid rest breaks, recovery periods, and nonproductive time by December 15, 2016.
The safe harbor provision is optional, and there is no separate penalty for declining the opportunity to file it. If an employer files the Notice of Election form, the employer may still opt-out by not completing the second requirement; however, the employer who opts out does not gain safe harbor protection and is liable for the unpaid wages and all applicable penalties.
If you are interested in opting for the “safe harbor” provision or have any questions regarding the new regulations, please do not hesitate to contact me.
Very truly yours,
The Team at the Law Office of Karen J. Sloat
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