Piece rate: What does an employer need to do in order to have the affirmative defense created by the statute?

Subdivision (b) of the statute says that an employer must comply with “all of the following,” and then lists several requirements. The first listed requirement is that:

“The employer makes payments to each of its employees, except as specified in paragraph (2), for previously uncompensated or undercompensated rest and recovery periods and other nonproductive time from July 1, 2012, to December 31, 2015, inclusive, using one of the formulas specified in subparagraph (A) or (B):

  1. The employer determines and pays the actual sums due together with accrued interest calculated in accordance with subdivision (c) of Section 98.1.
  2. The employer pays each employee an amount equal to 4 percent of that employee’s gross earnings in pay periods in which any work was performed on a piece-rate basis from July 1, 2012, to December 31, 2015, inclusive, less amounts already paid to that employee, separate from piece-rate compensation, for rest and recovery periods and other nonproductive time during the same time, provided that the amount by which the payment to each employee may be reduced for amounts already paid for other nonproductive time shall not exceed 1 percent of the employee’s gross earnings during the same time.”

There are several additional requirements set forth in subdivision (b), paragraphs (3) through (5), including that:

  • The employer must give notice to the Department of Industrial Relations by no later than July 1, 2016 of its election to make payments to its current and former employees pursuant to the statute.
  • The payments must be completed by December 15, 2016.
  • The payments to employees must come with a statement summarizing how the payment was calculated.
  • The employer must use due diligence to locate and pay former employees.
  • Payments for former employees who cannot be located must be made to the Labor Commissioner’s Unpaid Wage Fund (with an additional administrative fee).

Pursuant to an Order of the Fresno Superior Court, the State was temporarily restrained from enforcing the July 1, 2016 deadline for employers to submit notice of their election to make payments to current and former employees pursuant to Labor Code Section 226.2(b). Th e Director of Industrial Relations continued to accept and post these notices through July 28, 2016, when the temporary restraining order expired and the Court declined to extend it.

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