Rest Period Pay and Overtime Premiums for Piece-Rate Workers

by Hunter Pyle on Apr. 28, 2017

Employment 

Summary: Rest Period Pay and Overtime Premiums for Piece-Rate Workers

A complicated and developing area of California wage and hour law involves how to calculate wages and premium pay for piece-rate workers. In this post, we will explain the calculations for rest period wages and overtime premiums for piece-rate workers.

Many California workers are compensated on what is known as a “piece-rate” basis. Piece-rate means that a worker’s pay is based on a specific amount paid for completing a particular task or making a particular piece of goods. This could include truck drivers who are paid based on the number or type of loads delivered, factory workers who are paid based on the number of widgets completed, or construction workers, such as plumbers or electricians, who are paid based on the number of installations they do.

Even though piece-rate workers are not paid by the hour, they are still entitled to the protections provided by the California Labor Code. These protections include overtime premium pay for more than eight hours of work in a day or 40 hours in a week, meal periods before the end of fifth hour of work, separate compensation for required rest periods, and wage statements showing, among other things, the number of pieces completed, the applicable piece rates, and overtime and rest period pay.

But if someone is paid by the piece, how is their hourly wage calculated for the purpose of determining the amount of wages for paid rest periods and overtime premiums?

For rest period pay, which must be paid separately from any piece-rate compensation, the hourly rate paid to the employee must be the same as the average hourly rate earned by the employee during the workweek. If the average hourly rate is less than the minimum wage, rest periods must be paid at the minimum wage. According to California Labor Code section 226.2(a)(3)(i), average hourly rates for piece-rate workers are calculated as follows:

Divide the total compensation for the workweek, exclusive of compensation for rest and recovery periods and any premium compensation for overtime, by the total hours worked during the workweek, exclusive of rest and recovery periods.

This means that before dividing the total compensation by the number of hours worked, first subtract any pay for rest periods and overtime premiums from the total compensation, and subtract time spent during rest periods from total hours worked.

For example, for a piece-rate worker who works a 5-day 40-hour workweek, with two 10-minute rest periods per day (10 minutes x 2/day x 5 days = 100 minutes or 1.67 hours), and earns $500 in piece-rate wages, this worker’s rest period pay rate would be calculated as follows:

$500 (total compensation not including rest period or overtime pay)

Divided by 38.3 (total hours worked minus 1.67 hours rest period time)

Equals $13.04/hour (average hourly rate)

Multiplied by 1.67 hours (rest period time)

Equals $21.78 (rest period pay)

In this example the worker’s average hourly rate is $13.04, and his or her rest period compensation for the workweek should be $21.78. This amount must be paid separately to the worker from his or her piece-rate wages. See Labor Code § 226.2(a)(1).

For overtime premiums, piece-rate workers must be compensated at one and a half times their average hourly rate for each hour worked over eight hours in a day or 40 hours in a workweek. For example, assuming that a piece-rate worker worked a 6-day, 47-hour workweek with a total piece-rate compensation of $800, how is the overtime premium pay calculated for seven overtime hours? First, the rest period pay must be calculated, as above. Over six workdays with two 10-minute rest periods per day, the rest period time would be 120 minutes (2 hours). Thus, the rest period pay would be $35.56 ($800 ÷ 45 hours = $17.78/hour, and $17.78/hour x 2 hours = $35.56). Next, add the rest period pay to the total compensation, which equals $835.56, and divide by the total hours worked ($835.56 ÷ 47 = $17.78/hour). Then, multiply by .5 to get the overtime premium rate ($17.78 x .5 = $8.89), and multiply the result by the number of overtime hours to get the overtime premium pay owed ($8.89 x 7 = $62.23).

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