Labor Code 226.2: Are Piece-Rate Workers Compensated for Rest Periods?

What is California Labor Code 226.2?

California Labor Code section 226.2 says that workers who are paid on a piece-rate basis must be paid separately for their rest periods and “other nonproductive time.” Section 226.2 defines other nonproductive time as “time under the employer’s control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis.” For workers in California who are paid on a piece-rate basis this means that they must be paid at least the minimum wage for all hours worked, and for their rest period time, in addition to their piece-rate compensation. This law was passed following two appellate court decisions that interpreted California Wage Orders to require that piece-rate workers be compensated for all hours worked, which includes the time they are not performing work for piece-rate wages. Gonzalez v. Downtown LA Motors, LP, 215 Cal. App. 4th 36, 40 (2013) (piece-rate auto-repair workers “entitled to separate hourly compensation for time spent waiting for repair work or performing other nonrepair tasks directed by the employer during their workshifts”); Bluford v. Safeway, Inc., 216 Cal. App. 4th 864, 872 (2013) (under California law that employees must be compensated for each hour worked, “rest periods must be separately compensated in a piece-rate system”).

Section 226.2 also allowed employers to take advantage of a “safe harbor” provision before the law went into effect. The safe harbor gave employers a defense to claims under Section 226.2 if they made payments to workers for either a) the “actual sums due” for previously uncompensated rest periods or nonproductive time, or b) four percent of each affected employee’s gross earnings during the time between July 1, 2012, and December 31, 2015. Employers that wished to use the safe harbor had to notify the California Department of Industrial Relations by July 1, 2016, and make payments to workers by December 15, 2016.

Constitutional Challenges to Labor Code 226.2

On June 27, 2016 (three days before the deadline to claim the safe harbor), a group of employers filed a lawsuit seeking to have Section 226.2 invalidated, alleging that the law was unconstitutionally vague in violation of their due process rights. The trial court disagreed with the employers, granted the State’s demurrer to the complaint and dismissed the case. The employers appealed.

In an opinion published on January 4, 2019, the Court of Appeal held that Section 226.2 is not unconstitutionally vague and rejected all of the employers’ other due process arguments. Nisei Farmers League v. California Labor & Workforce Dev. Agency, No. F075102, 2019 WL 99087, at *6 (Cal. Ct. App. Jan. 4, 2019) (“we believe the trial court was correct in sustaining demurrer to the subject causes of action; that is, we conclude section 226.2 is not unconstitutionally vague.”).  In particular, the court held that the “statutory phrase ‘other nonproductive time’ in section 226.2 is not unconstitutionally vague. The statue explicitly defines ‘other nonproductive time’ to mean ‘time under the employer’s control, exclusive of rest and recovery periods, that is not directly related to the activity being compensated on a piece-rate basis…’ The language of the statutory definition is reasonably clear and specific and provides adequate notice of the nature of the conduct that is being described.” Id. at *9. Furthermore, employers were on notice of conduct proscribed by Section 226.2 at least since 2013 when Gonzalez and Bluford made clear that workers must be separately compensated for rest periods and nonproductive time when they are paid on a piece-rate basis. Id.

Labor Code section 226.2 provides important protections for California workers paid on a piece-rate basis. The Nisei Farmers League case confirms that the law also fully complies with employers’ constitutional due process rights.

If you have questions about Labor Code section 226.2 or your rights in the workplace, please feel free to email inquire@hunterpylelaw.com or call (510) 444-4400.