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Piece rate employees must be paid separately for breaks

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A recent decision of this state’s highest court has further expanded worker rights with respect to rest breaks.

On July 16, the Washington Supreme Court issued a unanimous decision in Demetrio v. Sakuma Brothers Farms, holding that piece rate employees are entitled to be paid separately for mandatory rest breaks.

For those that are not familiar with the concept, piece rate employees are paid by the piece or for production (i.e. per box packed), and are most commonly used in agricultural industries. Prior to the court’s decision, most piece rate employees were paid a single rate for work performed during each period, which included compensation for required rest breaks.

The court’s decision, which changes this historic practice, could have major implications for the state’s agriculture industry — as well as other businesses where employees are paid by task rather than by time.

The case began in 2013, when two agricultural employees instituted a class action suit in the United States Federal District Court against their employer asserting that the employer’s piece rate wage system deprived them of paid rest breaks as required by Washington regulation, WAC 296-131-020(2).

This regulation provides, in relevant part, that “[e]very employee shall be allowed a rest period of at least ten minutes, on the employer’s time, in each four-hour period of employment.” Consistent with historic industry practice, the employer at issue paid a “piece rate” wage based on the employees’ productivity, which was the only compensation received by the employees.

The employer claimed that the regulation allowed the employer to include pay for rest breaks in the piece rate paid to employees. In other words, the employer claimed that the piece rate paid to employees already accounted for the paid break periods.

The Federal Court certified (or sent) the issue of whether piece rate employees must be paid separately for rest breaks to the Washington Supreme Court for decision. The Supreme Court ultimately held that pay for rest breaks, separate from piece rate, was required.

The court focused on the meaning of the phrase “on the employer’s time” in the State regulation, concluding it required pay separate from the piece rate for rest breaks. The court looked not only to the plain language of the regulation, but also emphasized its obligation to advance the intended purpose of the regulation.

In line with its previous decisions, which interpreted the meal and rest break regulations “in a way that protected workers’ rights,” the court refused to “incentivize missed rest breaks at the expense of the employee’s health.” The court found that paying only piece rate wages, without any additional compensation for rest breaks, requires the workers to finance their own legally required rest breaks, and encourages employees to skip breaks.

Accordingly, the court held that the separate pay requirement followed the plain language of WAC 296-131-020(2), and is consistent with Washington case law interpreting rest break regulations.

Once the court concluded that piece-rate employees were entitled to be paid separately for rest breaks, the court was also asked to establish the rate at which the piece-rate employees must be paid for their breaks. The court held that employees must be paid their “regular” piece rate for each break period, rather than minimum wage (unless the minimum wage is higher than the “regular” rate).

In order to calculate an employee’s “regular” rate, employers must add the employee’s total piece rate earnings and divide them by the hours worked by the employee for the period, excluding rest break time during the period. In the event the employee’s “regular” rate is below the minimum wage, the employer must adjust the rate upwards to meet the minimum wage.

This calculation must be performed for each employee during each period. The court also supplied a hypothetical in its opinion to distinguish between the minimum wage rate calculation and the rest break or “regular” piece rate calculation. The Court’s hypothetical confirms that, in some cases, the “regular” piece rate paid for rest breaks may be higher than the employee’s standard piece rate wages. In other words, the employee could be paid more for rest breaks than for working.

The court’s holding was effective immediately upon passage. Therefore, employers with employees paid by the piece or by production should promptly implement the following practices:

1. Schedule rest breaks and ensure that employees take them. The court made it clear that it is the employer’s obligation to make sure that rest breaks are taken.

2. Pay for rest breaks separately. Employers will need to add 10 minutes of extra pay for each rest break taken within each four hour period.

3. Pay for rest breaks at the employee’s applicable “regular” piece rate (not necessarily minimum wage). Rest breaks are paid based upon the individual piece rate earned per pay period on an employee by employee basis. In the event the employee’s “regular” piece rate (calculated excluding breaks) is lower than the minimum wage, employers may use the minimum wage for the paid rest breaks.

4. Retain any records regarding employee breaks for the three years prior to the court’s holding. The court expressly avoided determining whether its ruling applied retroactively (i.e. whether employers have to pay for rest breaks that occurred before the Court’s decision). Therefore, employers should expect lawsuits and should collect and preserve information regarding breaks and wages going back at least three years. The statute of limitation for wage and hour claims is three years, meaning that any rest break claims older than three years from the date claimed will be barred.

Although the court’s holding was based upon an agricultural employer and interpretation of an agricultural statute, employers in other industries that employ piece rate workers should be prepared to have the court’s ruling applied to their employees.

Julie K. Norton is a member at the Wenatchee law firm Ogden Murphy Wallace, where her practice emphasizes employment law, general civil litigation, business and municipal law, and real estate transactions. She graduated cum laude from the Seattle University School of Law.