Flagged Hours, Piece Rate and Wage Violations. It's Only Money.

In April 2013 I reported on the case of Gonzalez v. Downtown LA Motors, LP.  The car dealership paid employees a “flagged hour” rate for repair and service jobs.  However, the workers’ days also included down time, training and other non-compensable activities.  The court concluded that although workers earned more than minimum wage for all hours on the job, the dealership violated minimum wage laws because each hour must be looked at separately.  Therefore, an employer who fails to pay a worker for a one-hour training course but pays the worker $200 for the other seven hours in the workday, has violated the law because the $200 in wages can’t be spread across all eight hours of work.  In other words, every hour must be viewed independently and every hour must be paid at least $8 per hour. 


Yesterday in Fresno County workers sued their employer, Driveline Retail Merchandising Inc., alleging that the company paid for the time it estimated workers to complete certain tasks, not actual time spent.  Moreover, the workers alleged that the company does not pay time spent in training, preparation or travel.  (Case No. 14 CECG 01131).  


The case illustrates the importance for employers to comply with all wage and hour regulations.  (Whether or not the claims have merit, a lawsuit has been filed and the employer will be required to spend time and money to resolve the case.)  Those regulations require that a non-exempt employee be paid at least minimum wage for each hour worked.  An employer cannot combine compensation earned over other hours to cover a shortfall in another hour.  This situation occurs most frequently in those workplaces where the employer pays a piece rate or flagged hour rate, as the term is known in the auto repair industry. 


If piece rates are used, an employer should create time records that show the time an employee spent on a particular project, and on other activities, such as training, cleaning up, or travel, that are not part of the piece rate system.  Of course, an employer who pays a piece rate typically is not interested in more paperwork.  Unfortunately, maintaining records of time worked is the only way an employer can protect itself. 


Wage and hour lawsuits are expensive to defend!  An employer must pay its own lawyer to defend the allegations.  In addition, if the workers prevail, an employer must pay their lawyer.  After all, how else would justice be served?