California recently passed AB 1513, adding section 226.2 to the Labor Code. The law significantly changed the way employers are required to pay piece-rate employees for rest and recovery periods and nonproductive time. Frist and foremost, all piece rate employers should ensure their current piece rate system is legally compliant. In addition, the law provides an affirmative defense to claims for uncompensated or under compensated rest and recovery breaks and nonproductive time. The deadline to take advantage of the affirmative defense is July 1, 2016.
While the new law went into effect on January 1, 2016, employers still have time to take the proper steps to defend themselves against lawsuits for unpaid rest breaks and nonproductive time. Employers should mark two very important and approaching dates on their calendar. The first, July 1, 2016, is the deadline to notify the Department of Industrial Relations (DIR) of a “Piece-Rate Back Pay” election. The second, December 15, 2016, is the deadline for all payments to be made. If the deadlines are met, employers will have the affirmative defense under the statute for time periods before December 31, 2015 and as early as July 1, 2012 against claims for unpaid nonproductive time and rest periods.
To take advantage of the affirmative defense employers must pay each of their employees for unpaid or underpaid nonproductive time and rest periods from July 1, 2012 to December 31, 2015 through one of two ways: (1) Simply calculating and paying the actual sums due, plus interest. If these numbers were not recorded or difficult to calculate, then employers can use the second option; (2) paying each employee an amount equal to 4% of their gross earnings in pay periods during which the employee worked for a piece-rate from July 1, 2012 to December 31, 2015. If the second option is chosen, employers can offset from the payment and amounts already paid for nonproductive time to the employee, but no more than 1% of the employee’s gross earnings for the time period.
Both methods require a statement summarizing how the payments were calculated and due diligence in locating and paying former employees. Time is running out to take advantage of the affirmative defense. Employers who wish to take advantage of the affirmative defense, should visit the DIR’s website where they can access the correct forms and submit the notice before the upcoming deadlines.
More importantly, employers should immediately contact their employment attorney to discuss (1) whether it is advisable to take advantage of the affirmative defense; and, (2) what alternative approaches may give employers additional protection from future claims.