'That Can't Be Right!' California Appellate Court Rules That Piece Rate Workers Are Entitled To Separate Hourly Compensation

A California Court of Appeal dealt another blow to employers this month when it held automobile mechanics, who earned at least minimum wage for every hour worked, were entitled to separate hourly compensation for any time not spent performing auto repairs. See Gonzales v. Downtown LA Motors, LP, 2013 Cal. App. Unpub. LEXIS 1728 (March 6, 2013). The attorneys for Downtown LA Motors (DTLA) argued it "can't be right" to find that employers who guarantee their employees the minimum wage for every hour worked somehow failed to satisfy their minimum wage obligation. The appellate court disagreed, awarding the class in excess of $1.5M.

Background

Gonzalez claimed that DTLA's piece rate plan paid auto mechanics only for time they were actually making repairs, and not for any other time, such as time waiting for customers to arrive, obtaining parts, cleaning their work stations, attending meetings, traveling to other locations to pick up and return cars, reviewing service bulletins, and participating in online training. DTLA's mechanics were compensated based on a piece rate known as "flag hours," which pays a set number of hours for a particular repair, regardless of the actual time the mechanic takes to complete the repair. For example, a brake repair might have a "flag hour" allotment of 2 hours, and the mechanic performing the break repair would thus receive 2 hours' pay, even if the repair took more or less than 2 hours to complete. Further, DTLA guaranteed the mechanics the minimum wage for every hour worked (not just time spent making repairs).

Citing Armenta v. Osmose, Inc.,135 Cal. App. 4th 314 (2005), the Gonzalez trial court found DTLA's compensation plan constituted illegal "pay averaging," and that DTLA was required to pay a separate hourly rate for any time the mechanics were not actively engaged in repairs. DTLA appealed.

Deciding Whether ArmentaApplies to Piece-Rate Compensation

e primary issue for the appellate court in Gonzalez was whether its previous decision in Armenta applied to piece-rate compensation. Armenta concerned hourly employees who worked pursuant to a collective bargaining agreement where the employer paid only for "productive" hours, and did not pay for "nonproductive" work, such as travel from the office to a work site. The employees in Armenta sued for alleged failure to pay minimum wage. The employer argued that it satisfied California's minimum wage requirement because, dividing the employees' compensation by...