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In Gonzalez v. Downtown LA Motors, LP., the California Court of Appeal held that to comply with minimum wage requirements in California, piece-rate employees must be paid a separate minimum wage for non-piece-rate work.
The plaintiffs were employed as automotive service technicians for Downtown LA Motors, LP (DTLA). The technicians were compensated on a piece-rate basis for repair tasks completed. DTLA assigned a flat rate for each task depending on how many “flag hours” the completed task was worth. Upon completion of a repair, the technician accrued a specified number of flag hours, regardless of how long it actually took to complete it.
In addition to monitoring a technician’s flag hours, DTLA also kept track of the time a technician spent at the work site, whether or not the technician was working on a repair order. When not carrying out repair tasks, DTLA required the technicians to stay on site and perform various non-repair tasks, including obtaining parts, cleaning their work stations, attending meetings, traveling to other locations to pick up and return cars, reviewing service bulletins, and participating in on-line training. DTLA technicians only accrued flag hours when they were working on repair tasks.
At the end of each pay period, DTLA calculated how much each technician would earn if paid an amount equal to the total flag hours worked multiplied by the applicable minimum wage. If a technician’s total piece-rate compensation fell short of this “minimum wage floor”, DTLA supplemented the technician’s pay by paying the difference.
Oscar Gonzalez, on behalf of a class of 108 technicians, sued DTLA, claiming that DTLA violated California law by failing to pay them a minimum wage for the time they were on the clock engaged in non-repair work. DTLA disagreed and argued that it complied with the Wage Order No. 4-2001 (Wage Order No.4), by ensuring that the technicians were paid an amount “not less than” the minimum wage for “all hours worked” during a pay period.
The trial court ruled in favour of the plaintiffs, holding that California law required DTLA to pay the technicians for their waiting times between repair orders. However, DTLA appealed.
The appellate court affirmed and upheld the trial court’s judgment.
Subdivision 4(B) of Wage Order No.4 provides the following guidance:
Every employer shall pay to each employee, on the established payday for the period involved, not less than the applicable minimum wage for all hours worked in the payroll period, whether the remuneration is measured by time, piece, commission, or otherwise.
“Hours worked” is defined in subdivision 2(K) of Wage Order No.4 as “the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so.”
Since DTLA required the technicians to remain on its premises while not carrying out repair tasks, the Court ruled that this time falls within the definition of “hours worked” and therefore must be compensated. By averaging the technicians’ compensation over hours worked in a given pay period, the Court found DTLA to be in violation of California’s minimum wage laws and that such a violation resulted in an underpayment to technicians by reducing their flat rate in order to compensate them for time they spent waiting.
The key takeaway: Employees should note that they must be paid either an agreed rate or the minimum wage rate. Under California law, an employer is prohibited from applying any part of any employee’s piece-rate pay as a credit against its minimum wage obligation.