1. June 6, 2016
For California employers who use a piece-rate compensation
system, a new law called AB 1513 codifies significant changes to
how they must pay their employees for time spent on so-called “non-
productive” activities — and potentially bring relief from liability for
past violations.
A piece rate system is any pay scheme that pays the employee a
fixed amount per unit produced (e.g., per unit assembled) or per
action performed (e.g., per mile driven), regardless of how long the
employee spent on the task. Piece-rate pay is common in numerous
industries, including “on demand” services, transportation, agriculture, installation
services, automotive repair and many others.
The new law was passed in response to recent California court decisions that retroactively
created liability for unpaid wages and penalties for employers who use piece-rate
compensation systems. The courts held that a piece rate pay system was in violation of
California wage and hour laws if it did not provide the employee with separate, additional
compensation for time spent on rest and recovery periods, and other “non-productive”
activities (i.e., any activity other than the specific task “paid for” by the piece-rate pay, e.g.,
cleaning, reworks, etc.).
Rest and recovery periods
AB 1513 now requires that piece-rate employees be paid for rest and recovery periods
and any other “non-productive” time at an hourly rate that is no less than the legal
minimum wage or the average hourly rate for the same pay period, whichever is higher.

2. In addition, the employee’s pay stub must reflect the total number of compensable “non-
productive” hours worked by the employee, and the applicable rate of pay and gross
wages for such periods.
In addition, the law also created a “safe harbor” period that allows employers to become
compliant with the new requirements, while limiting their exposure to past liability provided
certain conditions are met.
In order to avoid liability for certain kinds of damages and penalties available under state
law, an employer must: (a) by no later than July 1, 2016, provide written notice to the
Department of Industrial Relations of the company’s election to make such payment under
the “safe harbor” law, (b) by no later than Dec. 15, 2016, provide compensation for past
uncompensated time from July 1, 2012 to Dec. 31, 2015 to current and former employees
who were paid on a piece rate basis during those time periods but were not compensated
for rest periods, recovery periods or other “unproductive time,” and (c) provide certain
specified notices to the affected employees regarding the compensation being provided
under the “safe harbor” law.
Taking advantage of this “safe harbor” provision gives an employer facing potential liability
(especially in the context of a class action lawsuit) significant protections. This includes
avoiding penalties and liquidated damages under various provisions of the Labor Code,
including the potentially disastrous penalties that can be assessed under the Private
Attorneys General Act of 2004 (Labor Code section 2699).
Don’t despair
Many employers who have used piece rate compensation systems without any issue for
years will find that the new requirements are too impractical, burdensome or expensive for
their businesses now.
However, they need not despair as there are several alternatives available that enable
them to protect themselves from potential liability, while still incentivizing and rewarding
their employees for achieving high productivity levels.
Because the changes will affect each business differently, owners and managers should
be sure to consult with employment counsel on the best way to manage these changes.

3. David Szwarcsztejn is an attorney in the Orange County office of Carothers DiSante &
Freudenberger LLP, an award-winning California labor and employment law firm. Szwarcsztejn
represents California employers in a wide variety of employment claims, including wrongful
termination, wage and hour violations, discrimination, harassment, breach of contract, trade
secrets, fraud and unfair competition. He also works with clients on employee workplace solutions,
advice and training. He can be reached at davids@cdflaborlaw.com or (949) 622-1661.