Employment Law Reporter - May 2013: California Court Holds That Piece Rate Employees Are Entitled To Hourly Pay For Waiting Time


Like many other auto dealerships and other employers throughout the state, Downtown LA Motors, LP (“DLAM”), a Mercedes Benz dealership, compensates its service technicians on a piece rate basis. Under their system, technicians are paid a flat rate ranging from $17 to $32 depending on the technician’s experience for each “flag hour” a technician works. Flag hours are assigned by Mercedes Benz to every task that a technician performs on a Mercedes Benz automobile and are intended to correspond to the actual amount of time a technician would need to perform the task. All DLAM technicians are paid on this basis irrespective of how long it takes to complete a task. The technicians accrue “flag hours” only when working on a repair order. Plaintiffs worked 8-hour shifts and during their shifts were required to perform various non-repair tasks while waiting for cars to be repaired.

They accrued no flag hours for performing these non-repair tasks. In addition to tracking a technician’s flag hours, DLAM also keeps track of all the time a technician spends at the worksite regardless of whether the technician is working on a repair order. At the end of each pay period, DLAM calculates how much each technician would earn if paid an amount equal to his total recorded hours “on the clock” multiplied by the applicable minimum wage. DLAM refers to this amount as the “minimum wage floor”. If a technician’s flat rate/flag hour pay falls short of the minimum wage floor, DLAM supplements the technician’s pay in the amount of the shortfall. Despite this floor, in Gonzalez v. Downtown LA Motors, LP, an unpublished decision, the California Second Appellate District Court of Appeal has held that DLAM’s system is invalid and DLAM is liable for more than $1.5 million in unpaid “waiting time” and $237,840 in penalties.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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