As we have previously reported, in October 2015, Governor Brown signed Assembly Bill 1513. The bill created California Labor Code Section 226.2, which requires employers to pay employees who are compensated on a piece-rate basis for rest and recovery periods and “other nonproductive time” separately from any piece-rate compensation. Employers are now required to compensate employees for rest and recovery periods and other nonproductive time at the following rates:

Rest and Recovery Periods: No less than the higher of minimum wage or an average hourly rate, which is determined by dividing the total compensation for the workweek (not taking into consideration compensation for rest and recovery periods or any premium compensation for overtime) by the total hours worked during the workweek (not including rest and recovery periods).

Other Nonproductive Time (defined 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): No less than the minimum wage. However, an employer who pays an hourly rate of at least the applicable minimum wage for all hours worked, in addition to any piece-rate compensation, will be considered compliant with Section 226.2.

The new law also requires that the itemized wage statements employers provide to employees compensated on a piece-rate basis include the following items: 1) the total hours of compensable rest and recovery periods, as well as the rate of compensation and gross wages paid for such periods; and 2) the total hours of other nonproductive time, along with the rate of compensation and the gross wages paid during such periods.

Safe Harbor Deadline: Moreover, the law provides that employers have an affirmative defense for any claim for recovery of wages, damages, liquidated damages, statutory penalties, or civil penalties based solely on the employer’s failure to pay the employee compensation for rest and recovery periods and other nonproductive time for periods prior to and including December 31, 2015, if the employer satisfies the following requirements by December 15, 2016:

• The employer makes payments to each of its current and former employees for the amount of break and other nonproductive time not separately compensated as now required by the statute during the period July 1, 2012, through December 31, 2015.
• These payments may be calculated using either of the following methods (at the employer’s election):
  • 1) The actual amount of wages due for the break and nonproductive time that must be separately compensated, plus interest; or
  • 2) Four percent of the employee’s gross earnings during that period. If the employer paid additional amounts to cover some of what is now considered other nonproductive time, those amounts (up to 1 percent of gross earnings) may be deducted from the payments, for a minimum payment of 3 percent of gross earnings.
• The employer provides notice to the Department of Industrial Relations, which will be posted on the Department’s website until 2017, and provides employees with a document that states the payment is being made pursuant to Labor Code section 226.2 and provides the calculations being used to determine the payment.