Paid Rest Periods for Piece-rate Workers ... - Good Fruit Grower

Feb 2, 2016 - piece-rate worker's regular rate of pay, whichever is greater. ... for active work hours would frustrate the purpose of WAC 296-131-020(2) and ...
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Paid Rest Periods for Piece-rate Workers Unanswered Questions PHASE 1 – Agricultural DISCLAIMER: These answers are proposed DRAFT responses, formulated by L&I after reading all of the responses submitted by policy process participants. These draft responses may still be changed after further discussion and review. All responses below are specific to agricultural workers who are exempt from the overtime provisions of the minimum wage act. Answers are based from Demetrio v. Sakuma Brothers Farms, Inc., 183 Wn.2d 649, 355 P.3d 649 (2015); chapter 49.30 RCW; chapter 49.46 RCW; chapter 296-131 WAC; Administrative Policy ES.A.8.1 Administrative Policy ES.A. 8.2; and additional explanations of bonuses found at 29 CFR §§ 778.208, 778.211, 778.502. A. “Separate Agreement” for paid rest periods 1. The Supreme Court held that separate pay must be based on the higher of the regular rate of pay or minimum wage unless there was an agreement between the parties to pay a different rate for the rest break time. The Court gave the example of agreeing to pay more, but could the worker and employer agree to a lower amount for rest breaks so long as it isn’t below minimum wage? No, separate pay for rest periods must equal at least the applicable minimum wage or the piece-rate worker’s regular rate of pay, whichever is greater. Any voluntary agreement between the employer and employee must be equal to or at a higher rate than the piece-rate worker’s regular rate of pay. The Supreme Court decision (pg. 15 of the slip opinion) states, in part, “[i]f rest breaks are compensated at a lower wage than the pieceworker’s regular rate, there is a strong incentive to miss rest breaks.” Demetrio, 183 Wn.2d at 658. And in the footnote 5 on page 16, the Court clarified its reasoning: “[f]or example, it is conceivable that an employer and employee could agree to rest break pay at a higher rate than the employee’s regular rate.” Id. at 663 n.5. Paying a worker a lower rate for rest periods than for active work hours would frustrate the purpose of WAC 296-131-020(2) and discourage piece-rate workers from taking their breaks. 2. Did the Court leave open the ability for an employer and employees to contract for a separate rate for rest breaks? See the second sentence of the conclusion on p. 16 “…in the absence of a separate agreement…” and footnote 2 on p. 12 of the ruling. Certainly, absent a contract, rest breaks must be paid at the higher of the minimum wage or regular rate. Is it allowed for an employer and employee to agree by contract on a separate rest break pay structure that is higher or lower than the regular rate (but not lower than minimum wage)? The Court recognized that paid rest periods could be subject to voluntary bargaining between an employer and employee within the scope of the law. As such, any agreement of this nature must provide separate rate break pay equal to or at a higher rate than the employee’s regular rate of pay. (See answer A-1, above). The only paid rest period agreements that fulfill the purpose of WAC 296-131-020(2) are those agreements that contract to pay rest periods at a higher rate than the worker’s regular rate of pay. 2-2-2016

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Paid Rest Periods for Piece-rate Workers Unanswered Questions

3. Can a worker sign an agreement stating that he understands that the bonus pay includes rest breaks, and that there will be no separately calculated rest breaks? No, if a promise to pay “bonus pay” is part of the worker’s contract of employment, it would be a “non-discretionary” bonus and must be included as part of the piece-rate worker’s regular rate of pay and in the calculation for separate paid rest periods. (See definition of discretionary v. non-discretionary bonuses in Section B).

B. Multiple rates of pay (bonuses) To answer questions related to bonuses, we must first define “discretionary” and “nondiscretionary” bonuses. A “discretionary” bonus, gift, or payment in the nature of a gift given on special occasions need not be included in the regular rate of pay. Such a “discretionary” bonus includes any bonus in which the employer retains sole discretion both that a bonus will be paid and that the amount will not be determined until the end, or near the end of the bonus period. Discretionary bonuses are given without any prior contract, agreement, or promise (express or implied), causing the employee to expect the bonus. Discretionary bonuses are not included in an employee’s regular rate of pay. A “non-discretionary” bonus is any bonus which is promised to employees upon hiring or is the result of an agreement that includes, but is not limited to inducing the employees to work more steadily, more rapidly, more efficiently, more accurately, or is contingent upon the employee’s continuing in employment until the time the payment is made. If a bonus is geared toward work performance or production, it is not considered a discretionary bonus or gift and must be included in the regular rate of pay. Non-discretionary bonuses must be included in the piece-rate worker’s regular rate of pay. (References used: Chapter 49.46 RCW, Administrative Policy ES.A.8.1, 29 CFR §§ 778.208, 778.211, 778.502) 1. Is paying workers a flat hourly rate plus a production bonus allowed? The production bonus would be based on the number of pieces the worker picked, etc. If this is OK, must the rest break rate be the same as the agreed-to hourly rate, or must the production bonus also be taken into account in calculation the rest break rate? Yes, employers may choose to pay their employees a flat hourly rate of pay plus a production bonus. However, as stated above in the definition of “non-discretionary” bonuses, a production bonus must be included as part of the worker’s regular rate of pay and taken into account to calculate the separate paid rest period rate. 2. There are workers who alternate between piece-rate and hourly rate pay mechanisms. For example, employees are paid hourly rate of pay for the morning and then piece-rate in the afternoon: a. How should the employer calculate the payment for the rest periods? 2-2-2016

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Paid Rest Periods for Piece-rate Workers Unanswered Questions Rest periods for workers who alternate between piece-rate and hourly rate wage arrangements must be paid according to their basis of pay at the time they take their the rest period. For example, if the worker takes a rest period while working at the hourly rate of pay, the employer is not required to pay separately for the rest period. If the worker takes a rest period while working at piece-rate, the employer is required to pay separately for the rest period. b. Does the employer get to count that the morning rest period is already paid for? If the employee took a rest period in the morning while working at the hourly rate of pay, the rest period has been paid “on the employer’s time” and no separate payment is needed for the morning rest period. However, if the employee did not take a rest period before alternating to a piece-rate basis, the rest period must be paid separately at the worker’s regular rate of pay or minimum wage, whichever is greater. c. Can this scenario be added to L&I’s new administrative policy? This scenario may be added to the Administrative Policy ES.C.6.2. 3. Does the Supreme Court ruling apply to a person who is paid hourly and receives a bonus? Separate pay for rest periods does not apply to employees who are paid solely on an hourly rate of pay and receive a “discretionary” bonus. Separate pay for rest periods applies to employees who are paid an hourly rate of pay and receive a “non-discretionary” bonus that is based on production, e.g. the number of units of work, bins, trees, pounds, etc. 4. Is it acceptable to pay a per bin bonus at the end of the season for employees that stay through the complete harvest season? They are getting paid the higher of minimum wage or the working rate of pay, and are paid rest breaks at the calculated regular rate each week during the harvest season. Will the season-end bonus affect the piece rate rest break pay retroactively? Employers may choose to pay their employees a per bin bonus at the end of the season to incentivize them to stay through the complete harvest season. This is a “non-discretionary” bonus based on production that must be included in the employee’s regular rate of pay and employers are required to either retroactively re-calculate the separate paid rest period rate, or credit the entire production bonus to the pay period in which the bonus is paid and calculate the separate paid rest period rate of pay and pay for rest periods during that pay period accordingly. (See attached “Season End Bonus” document). If the season-end bonus is “discretionary,” it does not affect the separately paid piece-rate rest period. If the season-end bonus is “non-discretionary” and based on production, it must be included in the piece-rate worker’s regular rate of pay and employers are required to use one of the two methods for crediting the bonus to the worker’s regular rate of pay described above.

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Paid Rest Periods for Piece-rate Workers Unanswered Questions

5. If I pay an hourly rate (above minimum wage) and also pay a bonus for a crew if they exceed a certain number of pounds harvested from a block over a span of harvest dates, does this in any way affect how I have to pay rest breaks? This is a “non-discretionary” bonus based on production and must be included in the piecerate worker’s regular rate of pay and employers are required to use one of the two methods for crediting the bonus to the worker’s separate rest break pay described above. 6. If I pay an end of season bonus for any of several reasons, do I have to retroactively recalculate rest break pay? Examples of bonuses are: a. Staying to the end of the season If the season-end bonus is “discretionary,” it does not affect the separately paid piece-rate rest period. If the season-end bonus is “non-discretionary” and based on the employee’s production (e.g. per bin, tree, pound, etc.), it must be included in the piece-rate worker’s regular rate of pay and employers are required to use one of the two methods for crediting the bonus to the worker’s separate rest break pay described above. b. Having no quality claims on the products they harvested If the “no quality claims” bonus is “discretionary,” it does not affect the separately paid piece-rate rest period. If the “no quality claims” bonus is “non-discretionary” and based on the employee’s production, it must be included in the employee’s regular rate of pay and employers are required to use one of the two methods for crediting the bonus to the worker’s separate rest break pay described above. c. Volume bonus (exceeding a certain number of units) Yes. This is a “non-discretionary” bonus based on production and must be included in the employee’s regular rate of pay and employers are required to use one of the two methods for crediting the bonus to the worker’s separate rest break pay described above. d. Bonus for referring other people to the company (not recruitment) If a “referral of other people to the company” includes agricultural workers who are then hired by the employer, and the employee doing the referral receives a “bonus” that is determined by the number of workers recruited, the employee doing the referral is recruiting for the employer for a fee and is required to obtain a farm labor contractor license under RCW 19.30.010(6). If a bonus is based on the number of customers sent/referred to the company to buy products or to do business with the employer, such a bonus is based on production and would need to be included in the piece-rate worker’s regular rate of pay and employers are required to use one of the two methods for crediting the bonus to the worker’s separate rest 2-2-2016

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Paid Rest Periods for Piece-rate Workers Unanswered Questions break pay described above. If the bonus for referring other people to the company is “discretionary,” it does not affect the separately paid piece-rate rest period. e. Loyalty bonus for years of work If the loyalty bonus is “discretionary,” it does not affect the separately paid piece-rate rest period. If the loyalty bonus is “non-discretionary” and based on production it must be included in the employee’s regular rate of pay and employers are required to use one of the two methods for crediting the bonus to the worker’s separate rest break pay described above. NOTE: If a lump sum loyalty bonus for years of work is presented as a gift (even though it is paid with regularity so that the employees are led to expect it), it may be excluded from the employee’s regular rate. 7. For hourly or salaried employees who work in production or administration, is their pay affected by any sort of bonus programs that give rise to an incentive? Examples: a. Yield bonus (for a crop manager, or a fertilizer applicator, or an irrigator) b. Low unit cost bonus for growing a crop below the budgeted expense amount c. Quality bonus (not having any, or less than an allowable number, damage claims for the product due to quality, defects, grade, etc.) We need more information before attempting to respond to this question set. 8. For sales staff, in addition to a base pay a. Production bonus on the number of dollars or the number of units sold b. Loyalty bonus for building and retaining a customer base c. Account Receivable bonus based upon customers paying within credit terms We need more information before attempting to respond to this question set.

C. Recordkeeping 1. How should an employer document both the calculation of the regular rate and the payment of rest breaks on payroll records, paystubs, paychecks, etc.? WAC 296-131-015 states, “The pay statement shall include the number of hours worked or the number of days worked based on an eight hour day, the rate or rates of pay, the number of piece work units earned if paid on a piece work basis, the gross pay, the pay period, all deductions and the purpose of each deduction for the respective pay period. A pay statement shall also include the employer’s name, address, and telephone number.” Accordingly, employers must include a separate line item on each piece-rate worker’s pay statement for “separate paid rest periods” that states the rest period rate or rates of pay, the total hours spent on rest periods, and the gross amount paid for the rest periods. 2-2-2016

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Paid Rest Periods for Piece-rate Workers Unanswered Questions

D. Agricultural Civil Infractions 1. Will the penalties for non-compliance of the paid rest periods for piece-rate workers be per violation or per person? L&I investigates complaints filed against agricultural employers alleging missed rest periods. If the investigation shows violations of the rest period rules at WAC 296-131-020, L&I may issue an agricultural civil infraction to the employer. The maximum penalty amount for agricultural civil infractions (violations of WAC 296-131) is $250 (RCW 49.30.040 and RCW 7.80.120). Penalties for first-time violations generally are assessed at $250 per violation. Repeat violations may include a violation and penalty for every missed rest period and for each worker affected by the violation. Adjustment factors may be applied for good faith, size, and history of the employer. In addition to any penalties/fines assessed by L&I, RCW 3.62.090 requires all courts to assess and collect a public safety and education assessment fee, which cannot be suspended or waived by the court. For a $250 penalty assessed by L&I, the court will assess an additional $263, for a total of $513 per violation.

E. Rulemaking 1. Will L&I be updating rules [WAC 296-131-020(2)]? At this time, the Department does not anticipate engaging in rulemaking to address agricultural rest breaks.

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