Appeals Court Rules Employees Should Be Paid For “Standing Around”!
The following article was written by Art Silbergeld, Attorney-at-Law. Art represented the employer at the trial level and I asked him to give my readers his opinion regarding this recent decision. The decision, on its face, may appear to just impact dealerships however, it is far reaching and could impacts other industries as well.
In Gonzalez v. Downtown LA Motors LP, a decision of the California Court of Appeal filed on March 6, 2013, the Court dealt a potentially devastating blow to employers who pay employees – including auto dealer service technicians – on a piece rate (or flag hour) basis. The decision could impact dealerships throughout California, as well as garment industry, agricultural, transportation employers and those companies that pay inside sales employees on commission.
The right to compensate employees on a piece rate basis has been authorized in the California Labor Code since at least 1919, and that compensation system is used by employers of 1 million or more employees throughout California. All of the Industrial Welfare orders acknowledge piece rate compensation and state in section 4 that employers must pay at least the minimum wage for “all hours worked” in the payroll period. As the Supreme Court in the meal period case, Brinker Restaurants, stated: “The text of the wage order is dispositive . . .[and] The best indicator of [the IWC’s] intent is the language of the [wage order] provision itself.” Employers who pay piece rate have always assumed that the Wage Order means what it says.
Not so: even though Defendant paid its technicians at least minimum wage for all hours worked, Gonzalez states that when employees are paid on a piece rate basis, the employer must also pay them on an hourly basis at minimum rates for time in between piece rate tasks. The impact of the decision could force employers across many industries – those that use piece rate pay and those that pay employees on commission – to pay for time in between tasks when no work or work not compensated by the piece is performed. This, in turn, could force employers to revert to hourly compensation, depriving employees of the incentive to improve the efficiency of work. The incentive in the auto dealer industry has enabled thousands of technicians to earn annual pay well above per capita income year-after-year.
The Gonzalez Court arrived at its decision by superimposing on a dealer’s piece rate pay system language from an earlier decision, Armenta v. Osmose (2005) 135 Cal.App.4th 314. In Armenta, the employer refused to pay hourly employees for specific tasks at work that should have been paid. Instead of finding that employees paid on an hourly basis are entitled to be paid for “all hours worked”, Gonzalez imported from a DLSE Manual language suggesting that, in California, “all hours worked” means that every employer must pay minimum wage for each and every hour worked. When piece-rate tasks are not being performed, Gonzalez states an employer must pay for time in between tasks even if it has already added money to the paycheck to bring pay to minimum wage because the employee’s pay for all hours worked fell below minimum. The Armenta rationale has been adopted without further explanation in several decisions and, in Gonzalez, imposed wrongly, we believe, on piece rate pay.
Applied broadly, Gonzalez may trigger thousands of wage class actions against employers who are already reeling from having settled meal and rest period claims prior to the decision in Brinker Restaurant. Employers who cannot enforce individual arbitration agreements against named plaintiffs may again be exposed to class claims.
A petition for review must be filed with the California Supreme Court on or before April 15, 2013.
If you need any further information, please let me know.
Arthur F. Silbergeld
Dickstein Shapiro LLP
2049 Century Park East, Suite 700 | Los Angeles, CA 90067
Tel (310) 772-8308 | Fax (310) 772-8301