June 13, 2013

Court Holds That Because Rest Periods Must Be Separately Compensated For In A Piece Rate Pay Plan, Class Should Have Been Certified

A recently published appellate decision ordering class certification in a wage/hour class action, Bluford v. Safeway Stores, Inc. has multiple teaching points, some predictable and some unexpected.  Bluford predictably requires class certification where the legality of the employer’s meal break policy, or lack thereof, is at issue.  Bluford also predictably requires certification where the legality of the employer’s rest period policy itself is at issue.  What is unexpected is that in the course of ordering certification of such rest period claims, Bluford holds that piece rate pay does not compensate employees for rest periods, which must be separately compensated for over and above piece rate pay.

Safeway’s drivers were unionized, represented by the Teamsters and subject to a collective bargaining agreement (CBA) that provided for meal and rest periods.  Until 2006, Safeway policy did not provide for a second meal period if the driver worked more than 10 hours, and until 2008, the CBA did not do so either.  In opposition to class certification, Safeway introduced evidence that employees knew they could take a second meal break and in fact did so.  The trial court denied class certification, holding that individual issues predominated because each driver would have to be asked whether they were permitted a second meal period and the reason they did not take them.  The appellate court disagreed, holding that the evidence established that Safeway as a matter of policy failed to authorize second meal periods because there was no indication that drivers knew they were entitled to take them.  It held that the failure to make drivers aware that they were authorized to take a second meal period obviated the need for individual inquiries on the issue of liability, reversing the trial court’s class certification denial.

The plaintiffs also claimed that Safeway did not pay drivers for rest periods, as required by the Wage Order.   Safeway’s compensation system was a modified piece rate system.  It paid drivers based on mileage rates that varied by time of day and location, fixed rates for the performance of specific tasks, and hourly rates for other tasks – none of which included rest periods.  Safeway argued that its piece rate system had been designed to include rest periods and thus compensated for them.  The trial court, apparently accepting this argument, denied class certification, reasoning that individual inquiries into the reason an employee missed a rest period would predominate over common questions.  The appellate court again disagreed.

The court of appeals held that the trial court’s denial was improper because the plaintiffs’ theory of recovery – that drivers were not compensated for the rest periods they did take – had nothing to do with reasons for taking or not taking a rest period.  Going beyond simply holding that the question whether the piece rate system compensated for rest periods was a common one, the court addressed the merits and found the system unlawful.  None of the system’s compensation components directly compensated drivers for rest periods, which violated the requirement that rest periods be paid.  To accept the argument that the piece rate pay included rest period compensation, the court held, would be akin to averaging pay to comply with the minimum wage law, which is disallowed under California law pursuant to Armenta v. Osmose, 135 Cal. App. 4th 314 (2005).

This is the second court of appeal decision out of the Third Appellate District in Los Angeles to hold that piece rate systems do not compensate for all hours worked but instead compensate only for “productive” work time, that is, time not directly related to producing the “piece.”  The first decision, Gonzalez v. Downtown LA Motors, ___ Cal. App. 4th ___ (2013), held that the time automobile mechanics spent waiting for repair jobs had to be separately compensated at the minimum wage because it was not paid for by the fixed “flag rate” pay mechanics earned for each repair job.  (Our firm filed an amicus curiae brief in that case on behalf of the National Automobile Dealers Association.)  A petition for review in Gonzalez has been filed with the California Supreme Court.  We can only hope that the Supreme Court will step in and provide some much-needed clarification and guidance.  In the meantime, employers who use piece rate compensation systems should consult with counsel and evaluate the advisability of changing their pay practices.


Category: Wage-Hour,